Won-Dollar Exchange Rate at 1472.5 Won…Worst Year-End Since the Financial Crisis

On the last trading day of the foreign exchange market this year, the 30th, the won-dollar exchange rate rose further (the value of the won fell) to over 1,470 won. With political uncertainty continuing, the year ended with the worst exchange rate since 1997, when the International Monetary Fund (IMF) bailout was received.

On this day, the won-dollar exchange rate in the Seoul foreign exchange market (as of 3:30 PM) ended weekly trading at 1,472 won 50 jeon, up 5 won from the previous trading day. The exchange rate started trading at 1,475 won, up 7 won 50 jeon, and was mainly traded in the high 1,460 won range in the morning. As authorities' intervention concerns emerged, the exchange rate, which showed a downward trend, reduced its decline in the afternoon and ended trading above 1,470 won.

The uncertainty that has not been resolved even under the acting president Choi Sang-mok, who took office after the impeachment motions of President Yoon Suk-yeol and Prime Minister Han Duck-soo were consecutively passed, is reflected in the exchange rate atmosphere.

Min Kyung-won, a researcher at Woori Bank, analyzed, "Given the ongoing political instability and continued external strong dollar pressure, it is necessary to keep the upper limit open to the 1,480 won range," adding, "However, the foreign exchange authorities' micro-adjustment vigilance and the influx of export companies' end-of-month negotiations are expected to limit the rise in the exchange rate."

He continued, "Authorities' movements to quell anxiety due to the sharp rise in the exchange rate are observed throughout the market," and "If Acting President Choi takes a forward-looking attitude towards political stability, such as accepting the appointment of a constitutional judge, it is also necessary to consider the possibility of the dollar exchange rate showing a downward stabilization trend."

The year-end closing price of 1,472 won 50 jeon on this day is the highest since 1,630 won in 1997. It far exceeded the closing price of 1,259 won 50 jeon during the global financial crisis in 2008. There are concerns that the burden on banks and companies may be significantly increased next year, as the year-end closing price becomes an indicator for calculating various soundness ratios.

However, the foreign exchange authorities do not expect a situation like the foreign exchange crisis to occur. This is because, unlike then, the foreign exchange safety net is sufficient. According to the Bank of Korea and the Ministry of Strategy and Finance, net external financial assets are at the level of 977.8 billion dollars, and foreign exchange reserves are 415.4 billion dollars, ranking 9th in the world.

Lee Chang-yong, Governor of the Bank of Korea, also emphasized at the F4 meeting this morning, "If excessive one-sidedness in the market appears, additional market stabilization measures will be implemented in a timely manner."

Kang Jin-kyu Reporter josep@hankyung.com