Growing Political Instability... Exchange Rate Surpasses 1480 Won for the First Time Since Financial Crisis

Slight Reduction in Increase in the Afternoon... Falls Below 1480 Won

The Won-Dollar exchange rate hit its highest level in about 16 years since the financial crisis on the 27th, causing significant fluctuations in the foreign exchange market. After opening with a steep rise, the rate soared to the 1486 won range but gave up some of its gains by noon, moving in the 1470 won range.

As of 2:04 PM on the 27th, the Won-Dollar exchange rate is trading at 1472.1 won in the Seoul Foreign Exchange Market, up 7.3 won from the previous session (1464.8 won).

The rate, which started at 1467.5 won, rose sharply during the day, reaching the 1486 won range at one point. This is the highest level recorded in 15 years and 9 months since the financial crisis.

The strong dollar, combined with the burden of the impeachment motion against Acting President and Prime Minister Han Deok-soo, who refused to appoint a constitutional judge, is seen as contributing factors.

The world is also focusing on Korea's political risk. The impeachment motion against Acting President Han is interpreted as a sign that Korea's political crisis is worsening. AP reported, "The potential impeachment of Acting President Han could halt high-level diplomacy and exacerbate political paralysis that shakes the financial markets." Bloomberg also mentioned concerns about economic growth slowdown in Korea due to Trump's re-election, stating, "Political uncertainty is further pressuring the economy."

There are also many concerns in the domestic securities market. Seo Sang-young, a market analyst at Mirae Asset Securities, said, "The weak won trend has expanded," adding, "The weak won has been driven by the strong dollar and the impact of Korea's political uncertainty, but demand for settlements and short-covering mentioned in some quarters also seem to have played a role."

Analyst Seo noted, "As the Won-Dollar exchange rate fell below 1480 won (strong won) due to the strong yuan in the afternoon, the Korean stock market is also showing a limited decline," adding, "The stability of the exchange rate is the most crucial factor for the recovery of investment sentiment in the stock market."

Shin Min-kyung, Hankyung.com reporter radio@hankyung.com