The won-dollar exchange rate is again on a steep climb in the 1,500-won range. As it threatened the 1,540-won line during trading and soared to its highest level since the global financial crisis, concerns are growing in the market that a rate in the 1,500-won range could solidify into a new baseline rather than a temporary spike.
In the Seoul foreign exchange market on Wednesday, the won-dollar rate closed daytime trading at 1,529.7 won, up 13.3 won from the previous session. On a daytime closing basis, this is the highest level in about two months since March 31 this year, when it stood at 1,530.1 won.
In the subsequent night trading, the rate reportedly crossed the 1,540-won line at one point. This is the highest level in 17 years and three months since it recorded 1,561.0 won during trading on March 10, 2009.
The rise in the exchange rate is interpreted as the result of geopolitical instability in the Middle East combined with dollar strength. As the military conflict between the United States and Iran continued, international oil prices surged to the high $90s per barrel, exerting downward pressure on the won for South Korea's economy, which is highly dependent on energy imports.
The fact that the rate rose to as high as 1,536 won during trading in the offshore non-deliverable forward (NDF) market while the domestic foreign exchange market was closed the previous day was also reflected in the day's upward trend.
On the domestic supply-and-demand side, massive stock selling by foreign investors fueled the rate's rise. Over three trading days this month, foreign investors net-sold 18.7 trillion won worth of domestic stocks.
On this day as well, foreign investors net-sold 6.988 trillion won in the stock market, extending their net-selling streak to 19 consecutive trading days since the 7th of last month. As demand for reverse remittance grew, with stock-sale funds being converted into dollars and withdrawn, the value of the won fell further.
In particular, the exchange rate has remained in the 1,500-won range for 13 consecutive trading days since it surpassed 1,500 won at a closing price of 1,500.8 won on the 15th of last month. This exceeds the records of nine trading days from March 26 to April 7, right after the Middle East war, and 11 trading days from February 24 to March 10, 2009, during the global financial crisis.
It is also the longest period since the 49 consecutive trading days in the 1,500-won range from late December 1997 to early March 1998 during the foreign exchange crisis. Some in the market forecast that a rate in the 1,500-won range could become entrenched as a new exchange rate level rather than a temporary spike.
