Won, other Asian currencies gain against dollar. That could be bad news for Korea.

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Won, other Asian currencies gain against dollar. That could be bad news for Korea.

Published: 07 May. 2025, 19:24 Updated: 07 May. 2025, 20:26

Audio report: written by reporters, read by AI

An electronic board displays exchange rates at a currency exchange booth in Myeong-dong of Jung District, central Seoul, on May 7. [YONHAP]

The value of the Korean won rose above the 1,300 mark against the U.S. dollar for the first time in 2025, hitting its strongest level in nearly five months.

The gain comes amid growing expectations that the United States may push for a weaker dollar through trade negotiations, leading to a collective strengthening of Asian emerging-market currencies.

However, concerns are growing that tensions may escalate between the United States and China, as Beijing continues to maintain a weak renminbi despite Washington's calls for appreciation.

On Wednesday, the won closed at 1,398 per dollar at 3:30 p.m. in Seoul, up 7.3 won from the previous trading day. This is the highest closing value since Nov. 29, 2024, when it ended at 1,394.7.

The recent turnaround in the won’s value followed a broader rally among Asian currencies that began late last week. Market speculation has been mounting that the United States is seeking a coordinated depreciation of the dollar similar to the 1985 Plaza Accord as it enters trade talks with key Asian economies.

Taiwan's dollar surged 9.34 percent against the greenback between Sunday and Monday, following trade discussions with the United States on Saturday. Although Taiwan’s government denies it, speculation is mounting that it agreed to a currency depreciation as part of tariff negotiations with the White House.

A teller poses with U.S. $100 and New Taiwan dollar (TWD) $1000 banknotes at a bank in Taipei, Taiwan, on Feb. 23, 2017. [REUTERS/YONHAP]

Hong Kong, which operates a dollar peg system that keeps the Hong Kong dollar’s exchange rate within a set band against the U.S. dollar, intervened by selling 116.6 billion Hong Kong dollars ($15 billion) to defend the peg as the currency showed signs of breaching the band. It was the largest intervention since the peg was introduced in 1983.

The MSCI emerging market currency index, which tracks 24 emerging-market currencies, surpassed 1,830 points during trading on Monday — an all-time high.

Despite the recent weakness of the U.S. dollar, the currencies of Asian countries heavily exposed to U.S. tariffs had not appreciated significantly — until now. Market sentiment has shifted amid growing expectations that the United States will continue pushing for a weaker dollar.

“Currencies with the largest external surpluses are more exposed to fears of a ‘Plaza Accord 2.0,’ and [the Taiwanese dollar] is at the top of this list,” Ju Wang, head of Greater China FX & rates at BNP Paribas, told CNBC.

Bank of Korea Gov. Rhee Chang-yong also pointed to this shift during a press conference in Milan on Monday, saying the strengthening of the won and other Asian currencies appears to be tied to reports that Washington is discussing exchange rate issues in bilateral meetings.

As the region’s currencies gain ground, tensions over the value of the Chinese currency are expected to intensify between Washington and Beijing. The United States wants China to allow the renminbi to appreciate to help narrow its trade deficit, while China, struggling with deflation, is reluctant to strengthen its currency.

A screen in Hana Bank's trading room in central Seoul on May 7. [NEWS1]

On Wednesday, the People’s Bank of China set the renminbi’s reference rate at 7.2005 per dollar, a modest 0.004 percent increase from the previous day’s fixing of 7.2008. Compared to the April 30 fixing of 7.2014 — prior to the recent surge in Asian currencies — it has risen only 1.24 percent.

“The daily fixing rate signals the Chinese government’s stance on the renminbi, and its slow movement despite recent regional currency gains shows China is not ready to allow meaningful appreciation,” said Baek Seok-hyun, an economist at Shinhan Bank.

With the United States pushing for a stronger renminbi and China resisting, some experts warn that the standoff could spill over to other emerging Asian economies.

“Given China’s need to stimulate its economy, the likelihood of it giving in to U.S. pressure to raise the renminbi’s value is low,” said Seok Byoung-hoon, an economics professor at Ewha Womans University. “If the won continues to strengthen while the renminbi remains weak, it could hurt the export competitiveness of Korean firms.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM NAM-JUN [[email protected]]