[Hankyung Foreign Exchange Market Watch] Won-Dollar Exchange Rate Soars by 21.4 Won... Reflecting DeepSeek, Fed, and Trump Issues Simultaneously

The won-dollar exchange rate surged by more than 20 won on the 31st. It reflected issues such as the announcement of China's DeepSeek new product, the hawkish rate freeze by the U.S. Federal Reserve (Fed), and the Trump administration's tariff threats during the Lunar New Year holiday.

On this day, the won-dollar exchange rate in the Seoul foreign exchange market (as of 3:30 PM) ended weekly trading at 1,452.70 won, up 21.40 won from the previous trading day. The exchange rate started at 1,446.00 won, up 14.70 won, and rose above 1,450 won in the morning. It moved around 1,455 won, reaching as high as 1,456 won at one point during the day, before slightly declining at the end of the session.

The exchange rate rising above 1,450 won is the first time in 11 days since it reached 1,451.70 won on the 20th. After staying in the 1,430 won range for four consecutive trading days since the 21st, showing a somewhat stable trend, it surged again on this day right after the Lunar New Year holiday.

The rise in the exchange rate is considered a result of external variables during the holiday being reflected. The risk aversion sentiment that emerged as China released the low-cost, high-performance AI DeepSeek added to the depreciation pressure on the won, a risky asset. The withdrawal of foreign funds from the domestic stock market also influenced the rise in the exchange rate.

Additionally, the reaffirmation by U.S. President Donald Trump overnight of his existing stance to impose a 25% tariff on Mexico and Canada starting from the 1st of next month also fueled the dollar's strength. Furthermore, the decision by the U.S. Federal Reserve (Fed) to maintain the target range for the federal funds rate at 4.25-4.50% during the Federal Open Market Committee (FOMC) regular meeting on the 29th (local time) is also acting as a burden on the exchange rate.

Yoo Sang-dae, Deputy Governor of the Bank of Korea, held a market situation review meeting related to the Lunar New Year holiday and the U.S. FOMC results on this morning, stating, "Volatility in the U.S. stock market expanded significantly, centered on the information technology (IT) sector during the holiday," and "We will closely monitor how it spreads domestically." He also mentioned, "Given the still high uncertainty regarding the timing and pace of Fed's rate cuts, the economic policy implementation of the new U.S. administration, and domestic political situations, we will cautiously examine the development patterns of related risk factors and their impacts."

Kang Jin-kyu, reporter josep@hankyung.com