Dollar-Won Closes at 1,401 KRW as Hopes Rise for US-China Trade Talks… Reverting to Pre-Yoon Levels

# Dollar-Won Exchange Rate Returns to Pre-"Martial Law" Levels Amid Trade Optimism (New York - Yonhap Infomax) Correspondent Jinwoo Choi - The dollar-to-Korean-won exchange rate closed at 1,401.50 during overnight trading, mirroring levels last observed before the "martial law" incident. This shift was driven by the strengthening Chinese yuan, buoyed by optimism surrounding U.S.-China trade negotiations, and kept the exchange rate below the 1,400 mark for much of the session. At 2 a.m. Korean time on the 3rd, the dollar-won exchange rate closed at 1,401.50, a decline of 19.50 won from the prior day's close in the Seoul FX market. This rate matches the 1,401.70 level seen on December 2, the day before then-President Yoon Suk-yeol declared martial law. It also signifies a 3.80 won drop from this week's intra-day close of 1,405.30. # U.S.-China Trade Talks Boost Yuan Strength The dollar-won rate reflected optimism surrounding U.S.-China trade discussions, as it hovered in the 1,390-won range upon entering New York trading hours. U.S. Secretary of State Marco Rubio mentioned imminent talks in a Fox News interview, stating, “China has shown a willingness to meet and discuss trade, and related discussions are expected to commence shortly.” Additionally, a spokesperson for China’s Ministry of Commerce confirmed that “the U.S. has sent encouraging messages through various channels, expressing a desire for dialogue,” and added, “evaluations are currently underway.” The dollar-offshore yuan (CNH) exchange rate fell to its lowest level in approximately six months since November 11 of last year, significantly impacting the dollar-won exchange rate and pushing it as low as 1,391.50 intra-day. # Dollar Index Declines Despite Strong U.S. Employment Data On a broader currency level, the dollar index (DXY), which tracks the greenback's performance against six major currencies, gave up much of its weekly gains, dipping to 99.394. Despite unexpectedly strong U.S. labor market data, the dollar-won exchange rate continued its downward trajectory. According to the U.S. Department of Labor, nonfarm payrolls rose by 177,000 in April, surpassing the 12-month average of 152,000 and well above market expectations of 130,000, as polled by Yonhap Infomax. The unemployment rate remained steady at 4.2%, aligning with forecasts. As the dollar regained some losses past midnight, the dollar-won rate edged back above the 1,400-won threshold. # Analyst Insights: Market Sentiment Driven by Optimism on China Arup Chatterjee, Managing Director of Macroeconomics and Emerging Markets Strategy at Wells Fargo, remarked, “The market appears optimistic about China-related news, with dollar-long positions unwinding in Asia's FX markets.” Alvin Tan, FX Strategist at RBC Bank, added, “Markets are monitoring the broader economic environment while focusing on positive developments in China.” # Key Exchange Rates and Market Metrics At approximately 2:35 a.m., the dollar-yen exchange rate stood at 144.600 yen, while the euro-dollar pair traded at 1.13160 dollars. The offshore dollar-yuan rate was at 7.2189 yuan. The yen-won cross rate was recorded at 971.78 won per 100 yen, and the yuan-won exchange rate was 193.22 won. The dollar-won exchange rate saw an intra-day high of 1,440.00 won and a low of 1,391.50 won, marking a 48.50-won fluctuation—the largest since the start of overnight trading in July last year. When including pre-overnight trading data, this marks the largest swing since March 19, 2020, during pandemic-era volatility (49.90 won). The total spot FX trading volume, based on data from Seoul Foreign Exchange Brokerage and Korea Money Brokerage, was reported at $15.73 billion by the end of overnight trading. jwchoi@yna.co.kr