The won-dollar exchange rate closed the year at the 1,440 won threshold, driven by bargain-hunting demand and foreign investors' net selling of Korean stocks.
The won-dollar exchange rate closed at 1,439.0 won on the Seoul foreign exchange market Monday, up 9.2 won from the previous trading day, marking the year-end closing rate. The average exchange rate for this year, calculated based on weekly closing rates, reached 1,421.9 won, surpassing the 1998 foreign exchange crisis level of 1,394.97 won to record an all-time high.
The year-end closing rate drew significant market attention as it serves as the benchmark for corporations and financial institutions in preparing financial statements, evaluating performance, and managing foreign exchange risk. Higher exchange rates increase the burden on companies holding foreign currency debt.
Following the government's strong verbal intervention and foreign exchange supply measures, the won-dollar rate had plunged for three consecutive trading days starting December 24, falling 33.8 won, 9.5 won, and 10.5 won respectively. However, on the final trading day of the year, the rate rebounded by more than 9.2 won, erasing most of the previous day's decline.
The exchange rate opened at 1,433.5 won, up 3.7 won from the previous day, before dropping to a low of 1,427 won in early trading. It gradually turned upward, rising to 1,439.9 won in the afternoon and temporarily spiking to 1,442.8 won after 3:30 p.m.
The rate increase is attributed to bargain-hunting following the recent decline, combined with thin liquidity due to year-end trading conditions and foreign investors' net selling of Korean stocks. Yen weakness also contributed to won weakness, analysts said. Foreign investors net sold 479.4 billion won worth of stocks on the KOSPI market.
"The rate increase after the close was largely due to settlement demand," said Jung Yong-ho, deputy head at KB Securities. "With continued foreign selling of stocks, upward pressure on the rate persisted throughout the day."
Another foreign exchange market expert said, "Looking only at today's trading, there was no strong impression of active intervention by authorities to manage the year-end closing rate."
Meanwhile, the government plans to formalize improvements to foreign exchange and capital market systems early next year. Vice Finance Minister Lee Hyung-il said at the Foreign Exchange Soundness Council and MSCI developed market index inclusion task force meeting held at the Korea Federation of Banks building in Jung-gu, Seoul, "We will announce a roadmap for foreign exchange and capital market reforms for MSCI developed market index inclusion through the '2026 Economic Growth Strategy' early next year."
Representatives from the Ministry of Economy and Finance, Financial Services Commission, Bank of Korea, Financial Supervisory Service, and Korea Exchange attended the meeting to discuss institutional improvements and schedules for MSCI developed market index inclusion.
According to the Seoul Foreign Exchange Market Committee, the Seoul foreign exchange market will be closed on December 31, and on the first trading day of the new year, January 2, the opening time will be delayed by one hour to 10 a.m. The closing time remains unchanged at 2 a.m. the following day.
