Won-Dollar Exchange Rate Soars 46.1 Won in 6 Trading Days... Is the 1,400-Won Mark on the Horizon Again?

Return to 1,380 Won Range After 15 Trading Days Based on Weekly Close

Market Split Over 1,400 Won Mark: "Excessive Concern" vs. "Too Early to Be Reassured"

Following a rise in international oil prices and U.S. Treasury yields, the U.S. Federal Reserve (Fed) raised its benchmark interest rate, sending the won-dollar exchange rate—which had fallen to the 1,330 KRW range—soaring to the 1,380 KRW range in just six trading days. In the foreign exchange market, there is a consensus that it is unlikely for the rate to return to the 1,400 KRW range, as global artificial intelligence (AI) companies are maintaining their facility investment (CAPEX) plans, and Korean semiconductor companies, which are direct beneficiaries, continue to sell dollars. However, some argue that—with international oil prices still at elevated levels and the U.S. policy rate hike further widening the Korea-U.S. interest rate gap—the possibility of a short-term return to the 1,400 KRW level cannot be ruled out.

According to the Seoul foreign exchange market, as of 9:00 a.m. on September 18, the won-dollar exchange rate was trading at 1,380.1 KRW, down 2.1 KRW from the previous session's closing rate at 3:30 p.m. The previous weekly closing price for the won-dollar exchange rate was 1,382.2 KRW. On a weekly closing basis, this marks the first time in 15 trading days since August 27 (1,380.9 KRW) that the rate has returned to the 1,380 KRW range.

Won-Dollar Exchange Rate: Sharp Drop, Then Surge in One Month

The won-dollar exchange rate, based on weekly closing prices, fell by 61.6 KRW from August 19 to September 9, only to rebound by 46.1 KRW through the previous session—demonstrating significant volatility. On August 19, the exchange rate stood at 1,397.7 KRW, its lowest level in about 11 months since September 24 of the previous year (1,397.5 KRW). The decline deepened, reaching 1,336.1 KRW on September 9—the lowest in 1 year and 11 months since October 2, 2024 (1,319.3 KRW).

The inflow of U.S. dollars following SK hynix's American Depositary Receipt (ADR) listing, along with the ongoing dollar selling (nego) by major semiconductor exporters such as Samsung Electronics and SK hynix, is cited as driving the strength of the Korean won.

However, after rebounding to 1,339.2 KRW on September 10, the exchange rate has continued to rise sharply through the previous session. The main factors cited are the sustained rise in U.S. Treasury yields since last month and the surge in international oil prices caused by escalating conflict in the Middle East this month. The yield on the U.S. 10-year Treasury note, which was 4.789% on September 9, surpassed 5% during intraday trading on September 14 (local time). On the same day, West Texas Intermediate (WTI) crude oil prices exceeded 100 dollars per barrel during intraday trading. The won-dollar rate surged 46.1 KRW over six trading days, from 1,336.1 KRW on September 9 to 1,382.2 KRW on September 17.

Will It Return to the 1,400 KRW Level? Market Split: "Not a Major Concern" vs "Too Early to Be Assured"

Yonhap News Agency

There is a divergence of opinion in the foreign exchange market over whether the won-dollar exchange rate will once again breach the 1,400 KRW mark. Some believe that, given the continued substantial current account surplus and the recent stabilization in U.S. Treasury yields following the Fed's rate decision, further upward pressure on the exchange rate will be limited.

The Bank of Korea projected at its provisional briefing on the balance of payments for July 2026, held on September 4, that this year’s annual current account surplus would reach 450 billion dollars. A surplus of about 430 billion dollars is also expected next year. In addition, the U.S. 10-year Treasury yield has dropped to the 4.9% range since the Fed raised its policy rate, which is also cited as a factor that may cap the exchange rate’s upper limit.

Hwan-Yeol Lim, an economist at Woori Bank, said, "With exports remaining robust and as long as the proportion of foreign currency converted to won by major exporters stays the same, the dollar supply in the market will continue to increase. Supply-demand factors are likely to restrain the exchange rate, so I do not expect it to climb to the 1,400 KRW range by year-end."

On the other hand, concerns have also been raised that the possibility of the won-dollar exchange rate returning to the 1,400 KRW level should not be dismissed if the strong dollar and high oil prices persist and if the pace of dollar selling by semiconductor companies weakens. On September 16 (local time), the Fed raised its benchmark interest rate by 0.25 percentage points to 3.75–4.00% per annum. This is the first rate hike in 3 years and 2 months since July 2023, marking a shift of monetary policy back to a tightening stance. As the Bank of Korea’s policy rate currently stands at 3.00% per annum, the Korea-U.S. policy rate gap has widened again to a maximum of 1.00 percentage point.

The Fed also released its Summary of Economic Projections (SEP), in which the median policy rate forecast for the end of 2026 was raised by 0.3 percentage points to 4.1%, up from June’s 3.8% projection, suggesting the possibility of further rate hikes within the year. The dollar index, which measures the dollar's value against the currencies of six major countries, is also hovering near the 100 level.

Jeonghoon Seo, Senior Research Fellow at Hana Bank, commented, "A combination of the Fed's continued rate hike stance and rising oil prices is likely to support a strong dollar trend for the time being. We should keep an eye on the possibility of the rate rising not just to the 1,400 KRW level, but even higher."

This content was produced with the assistance of AI translation services.