Won Weakens to 1,554.9 Per Dollar, Near 17-Year Low Despite Export Boom

Near 1,555, highest in 17 years

Foreign stock selling, weaker yen add pressure

The won fell to its weakest level in 17 years on July 1, even as South Korea moved within reach of $1 trillion in annual exports. Foreign investors’ stock sales and the yen’s weakness have continued to weigh on the currency, offsetting the country’s hefty trade surplus.

The won-dollar exchange rate rose 5.5 won to 1,554.9 won per dollar at the close of daytime trading in Seoul. It was the highest level since March 5, 2009, during the global financial crisis, when the rate reached 1,568 won. On a closing basis, the exchange rate has remained above 1,500 won for 32 straight trading sessions since June 15. It opened at 1,549.8 won, up 0.4 won from the previous day, and climbed sharply through the morning. At about 10:18 a.m., it briefly touched 1,559.2 won, nearing the 1,560 threshold.

Until June 30, many in the market had expected foreign investors’ rebalancing of local equities ahead of the half-year end to ease in July. Instead, overseas investors sold 2.3 trillion won ($1.66 billion) worth of stocks on the Kospi on July 1, extending net sales to a ninth consecutive session.

The yen, which tends to move in tandem with the won, also continued to slide sharply, adding to upward pressure on the exchange rate. On July 1, Sanae Takaichi made clear that Japan would continue to incorporate aggressive fiscal spending into next year’s budget. The dollar-yen rate briefly climbed to 162.8 yen during daytime trading.

Markets are keeping open the possibility that the won-dollar exchange rate could rise above 1,600. South Korea’s foreign-exchange authorities are focusing less on aggressive intervention than on smoothing the pace of the move. With foreign demand for dollars still lined up, a hasty intervention could deplete foreign-exchange reserves while giving overseas investors a cheaper opportunity to buy dollars. Moon Da-woon, an analyst at Korea Investment & Securities, said that if the rate breaks above its previous high of 1,560 won per dollar, it could climb as far as 1,600 because there is little resistance beyond that level.

Sim Seong-mi