Won Rises on Trade Progress, Equity Inflows

The South Korean won weakened to around 1,457 per dollar, extending losses for another session markets digested renewed uncertainty over US monetary policy, compounded by lingering trade tensions.

President Trump’s nomination of Kevin Warsh to lead the Fed added uncertainty, as traders eyed a stronger dollar and his approach to inflation and growth.

Sentiment was further dampened by US–Korea trade concerns.

High-level talks in Washington ended without a breakthrough after Trump warned that reciprocal and auto tariffs on Korean goods could be lifted back to 25%, reviving fears over Korea’s export outlook and policy risks.

Meanwhile, the won’s decline was partly cushioned as South Korea’s exports rose 33.9% in January to $65.85 billion, marking the fastest growth in four and a half years and exceeding forecasts, driven by strong demand for AI servers.

The South Korean won weakened to around 1,437 per dollar, retreating from a near three-month high in the previous session, as renewed uncertainty over US-Korea trade relations weighed on sentiment.

The first day of high-level talks in Washington ended without an agreement after President Donald Trump warned that reciprocal and auto tariffs on Korean goods could be raised back to 25%.

This heightened concerns over Korea’s export outlook and lingering policy risks, limiting further gains in the won despite recent stabilization efforts.

Meanwhile, the dollar found modest support as global markets turned cautious after Trump said he would soon announce his pick for the next Federal Reserve chair, adding uncertainty over policy outlook and pressuring regional currencies, including the won.

Softer risk appetite across equities and cryptocurrencies underpinned mild dollar demand, encouraging profit-taking in the currency after its recent rally.

The South Korean won weakened to around 1,450 per dollar, reversing gains from the previous session, pressured by renewed US tariff threats and persistent domestic dollar demand.

The currency came under pressure after US President Donald Trump unexpectedly announced a raise on auto and reciprocal tariffs on South Korean imports to 25% from 15%, reviving concerns over Korea’s export outlook and bilateral trade uncertainty.

The announcement weighed on market sentiment, dragging auto and battery shares lower and prompting FX hedging flows as investors reassessed risks to growth and cross-border investment plans.

At the same time, sustained domestic demand for foreign currency reinforced the won’s weakness, as foreign currency deposits rose to a record high amid elevated exchange-rate volatility.

The buildup in dollar holdings by corporates and households has limited selling pressure on the greenback, keeping the won under strain despite authorities’ verbal intervention.

The South Korean won strengthened to around 1,440 per dollar, reaching its highest level in three weeks, supported by broad US dollar weakness and sustained foreign equity inflows.

The dollar softened across major and Asian peers as intervention risks in Japan weighed on the greenback, lifting regional currencies, including the won.

Additionally, the won drew support from robust foreign demand for South Korean equities, with overseas ownership nearing a six-year high, led by strong gains in technology, shipbuilding, defense and nuclear power stocks.

The KOSPI’s rally above the 5,000 mark encouraged FX inflows and reduced hedging demand, while easing domestic dollar hoarding, including a decline in corporate dollar deposits, further limited upside pressure on the dollar-won pair.

Looking ahead, attention remains on broad dollar sentiment and global FX developments tied to Japan and US policy signals, alongside upcoming Federal Reserve guidance.

The South Korean won slipped to around 1,470 per dollar, sharply pulling back gains from the previous session as investors assessed recent comments from Bank of Korea Governor Rhee Chang-yong.

On Wednesday, he announced in a conference that the currency is trading well below levels justified by economic fundamentals but warned that any rebound could be volatile.

Rhee stated that the exchange rate has been driven up by long-standing expectations of further won depreciation, which may take time to reverse.

He also pointed out that the heavy overseas investing by institutions like the National Pension Service and retail investors, often without currency hedging, could amplify market volatility if the exchange rate adjusts sharply.

Further weighing on sentiment, South Korea’s economy unexpectedly contracted in the final quarter of 2025, marking the steepest decline since late 2022.

The South Korean won advanced to around 1,471 per dollar, rebounding sharply from a four-week low after investor sentiment improved on government assurances.

President Lee Jae Myung stated that policymakers expect the won to move back toward the 1,400 level over the next two months, stressing that its recent weakness reflects global market conditions rather than domestic fundamentals alone.

He assured that the government would keep reviewing available tools to curb volatility, while acknowledging that stabilizing the currency would be difficult to achieve through national policies alone.

Adding to positive sentiment, Finance Minister Koo Yun-cheol on Wednesday announced policy measures aimed at boosting economic growth and reducing disparities.

Under its 2026 economic plan, the government aims to kickstart a rebound in potential growth, raising funds to 1.7 trillion won from 1 trillion won.