The won-dollar exchange rate against the U.S. dollar closed at 1,532 won on the 26th. It fell 10.7 won from the previous transaction day.
The won-dollar exchange rate opened at 1,547.3 won that day and surged to 1,549.8 won at about 10:31 a.m. It was still around 1,545 won as of 3 p.m. But it began to fall about 30 minutes before the transaction close and plunged to 1,528.1 won at about 3:14 p.m. That was 21.7 won lower than the high. It then inched up and finished the transaction.
In the market, speculation emerged that foreign exchange authorities dumped a large amount of dollars they held just before the close, driving the rate down. Had the won-dollar rate not plunged, it could have finished the transaction in the 1,540-won range for a third straight transaction day. From the 15th of last month through that day, the won-dollar rate has stayed above 1,500 won for 29 consecutive transaction days. It is the second-longest stretch after the foreign exchange crisis (49 consecutive transaction days).
The recent rise in the won-dollar rate is seen as stemming from broad dollar strength. Inflation has risen due to the Middle East war, increasing the likelihood that the United States will pivot to monetary tightening. When the United States raises its benchmark interest rate and tightens the money supply, most currency, including the won, tends to weaken.
Net selling of Korean stocks by foreign investors also played a role. When foreigners sell Korean stocks and convert the proceeds into dollars, dollar demand expands and the won-dollar rate tends to rise. Foreigners were net sellers of 4.6269 trillion won that day. From January to May this year, foreigners dumped 114.224 trillion won. That is about 10 times last year's annual net selling (11.0768 trillion won).