This figure is a sharp increase of 7.7 won from the previous day, and is the highest figure in 7 months since last April. It soared to 1,476.0 won at one point during the day, clearly revealing the anxiety in the financial market.
The domestic stock market was hit hard by large-scale selling by foreign investors. On this day, foreigners sold net 2.821 trillion won, and KOSPI closed at 3,853.26, down 3.79%. The resurgence of AI bubble theory and the sell-off of U.S. technology stocks were negative factors for the domestic market.
However, a more serious problem is that the won is depreciating at the largest rate among global currencies. In the past month, the won has fallen 3.29% against the dollar, a larger decline than the Japanese yen (-2.11%), and this is in contrast to the strength of major currencies such as the euro (+0.1%) and the pound (+0.54%). JoongAng Ilbo ccnn.co.kr. The currencies of emerging Southeast Asian countries also fell much smaller than the won.
Beyond simple exchange rate fluctuations, this is a signal that the Korean economy is evaluated as the ‘weakest currency’ in the global market. The value of the won has fallen to its lowest level since 1998, right after the foreign exchange crisis, and is even giving rise to the disgrace of being called the ‘Korean exchange rate discount’.
Amid the strengthening of the dollar and the weakening of the yen, the fact that the U.S. employment indicator dampened expectations of a base interest rate cut also encouraged the weakening of the won. The dollar index continues to be strong, exceeding the 100 mark for three days.
Warning sound of ‘high exchange rate = crisis’ Already the real economy is in dire straits.
Historically, the won has fallen below 1,450 won only three times: the IMF foreign exchange crisis (1998), the global financial crisis (2008), and last year’s martial law crisis. This surge in exchange rates is not a simple market fluctuation, but is interpreted as a crisis signal revealing the structural vulnerabilities of the Korean economy.
This is why the foreign exchange authorities have regarded 1,400 won as the ‘Maginot Line’. Now that the won has recorded the world’s highest rate of decline, the market is casting doubt on the credibility of the Korean economy itself.
The President and the ruling party appear to be virtually ignoring the serious risk of a sharp rise in exchange rates, without making any special comments or providing countermeasures. However, a situation in which the exchange rate exceeds the 1,470 won level causes the prices of imported raw materials and energy to rise sharply, increasing the cost burden on manufacturing and small and medium-sized enterprises, and also taking a direct hit to the prices of consumers who import daily necessities from overseas.
In particular, even if oil and grain prices do not rise in dollar terms, the perceived price level in the country will rise simply due to the decline in the value of the won, which is directly related to the pressure on living costs for working-class households. At the same time, as the stock market plummets due to the outflow of foreign funds, the damage caused by the rapid decline in the value of people’s pension and investment assets is becoming a reality.
Ultimately, the government’s inaction is resulting in a vicious cycle of exchange rate instability spreading throughout the real economy and financial markets.
https://www.fntoday.co.kr/news/articleView.html