Korean Won Appreciates: Hits 7-Month Low in Exchange Rate, Ranks 2nd Among Major Currencies

### South Korean Won Soars to 1,360 Against the Dollar Amid U.S.-Korea Currency Discussions and Dollar Weakness **Final Exchange Rate Reaches 7-Month Peak; Korean Won Climbs 2.45% Against the Dollar** Seoul—In a notable turn of events, the South Korean won surged to its highest level in seven months, settling in the 1,360 range against the U.S. dollar. The won appreciated by 2.45% over the week, becoming the second-strongest currency performer, just behind the Swedish krona. This surge was influenced by market optimism surrounding U.S.-South Korea currency talks, along with the declining dollar due to U.S. fiscal uncertainties and Moody’s credit rating downgrade. Financial experts predict that this downward trend in exchange rates may continue in the short term, with U.S.-Korea tariff negotiations and global monetary policies being crucial factors. ## Korean Won Hits 7-Month High as Dollar Index Falls The won-dollar exchange rate finished at 1,366.5 KRW in after-hours trading on Friday, marking its lowest point since October 16 last year when it stood at 1,364.5 KRW. This reversal contrasts the spikes seen after significant political events in late 2022. The exchange rate quickly dropped from the 1,420 KRW level to 1,390.8 KRW on April 14, following reports of U.S.-Korea currency discussions. Subsequent pressures from Moody’s U.S. credit downgrade and weak U.S. Treasury auctions kept the dollar on its declining path through the week. The South Korean won outperformed most major currencies during this period. Its 2.45% weekly appreciation surpassed the euro (+1.77%), Japanese yen (+2.13%), British pound (+1.94%), Swiss franc (+2.07%), and Canadian dollar (+1.69%). Only the Swedish krona saw a higher appreciation (+2.51%). In Asia, currency gains for the Thai baht (+2.40%), Australian dollar (+1.44%), Chinese offshore yuan (+0.51%), and Taiwan dollar (+0.85%) were lower than the won’s strong performance. ## U.S.-Korea Currency Discussions Bolster the Won Ongoing U.S.-Korea currency talks are driving expectations for further appreciation of the South Korean won. Investor sentiment points to potential U.S. pressure for stronger Asian currencies to address trade imbalances. Despite formal statements from the U.S. advocating a "strong dollar" policy, financial markets are increasingly factoring in possible Chinese and Korean currency adjustments. Steven Miran, of the White House Council of Economic Advisers, reiterated on April 22 during a Bloomberg podcast that "a strong dollar is good for America." Although Korea’s Finance Ministry confirmed that negotiations with the U.S. are happening at a working level, currency strategists believe America's broader objective may focus on reducing trade surpluses. "Given America's significant trade deficits with key Asian economies, it’s likely the U.S. will push for currency realignment in future trade agreements," said Seo Jung-hoon, Senior Researcher at Hana Bank. "These efforts could maintain upward pressure on exchange rates," he added. ## U.S. Fiscal Concerns and Weak Dollar Erode Trust in Dollar Assets The dollar's decline last week was further intensified by growing fiscal concerns about the U.S. government’s policy landscape. Moody’s downgrade of the U.S. credit rating and disappointing 20-year Treasury auctions drove the dollar index down to 99.042. Experts attribute the declining confidence in dollar-denominated assets to factors including federal tax reforms under the Trump administration and long-term fiscal risks. Baek Seok-hyun, an economist with Shinhan Bank, noted, "Historically, tax reforms have driven expectations of economic growth and boosted Treasury yields. However, current fiscal policy may worsen deficits and weaken U.S. Treasury prices." In a significant sign of market anxiety, the 20-year Treasury yield reached 5%, its highest since its 2020 reintroduction, following tepid demand for the recent $16 billion auction. ## Bearish Outlook for Dollar-Won Exchange Rate Traders anticipate ongoing downward pressure on the dollar-won exchange rate, influenced by evolving bilateral tariff negotiations and monetary policies. “I see 1,370 KRW as the lower boundary; however, the market is increasingly pricing for levels below this range,” said Lee Nak-won, an FX derivatives expert at NH Nonghyup Bank. “Technically, the won-dollar could test the 1,340 KRW mark,” he added. The U.S.’s tax reform discussions and tariff deadlines could further weaken the dollar. “As trade negotiations progress and domestic inflation data stabilize, we expect broader selling pressure on dollar-backed assets,” added Baek Seok-hyun. While some experts advise caution regarding excessive market pessimism, concerns about potential U.S.-Asia currency realignments remain significant. "These market jitters may be premature, given the absence of official action so far," said Lee Min-hyuk, an economist at KB Kookmin Bank. Long-term, economists suggest that the forex market will closely monitor G7 summits and U.S. debt ceiling talks to gauge risks tied to fiscal uncertainty. “Korea’s macroeconomic fundamentals are also expected to improve post-election, further supporting the won,” Seo Jung-hoon noted, hinting at a potential gradual decline toward the mid-1,350 KRW range.