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Value of Korean won surges to seven-month high as greenback slides amid uncertainty, instability

Published: 26 May. 2025, 15:15 Updated: 26 May. 2025, 18:09

Graphic depicting exchange of the Korean Won and U.S. Dollar [JOONGANG ILBO]

The Korean won surged to its strongest level in seven months last week, outpacing all major global currencies as the U.S. dollar weakened amid mounting economic uncertainty and political instability in Washington.

As the exchange rate returns to levels seen before Donald Trump was elected the U.S. president, analysts say the era of the “strong dollar” is coming to an end.

Dollar weakens amid growing U.S. uncertainty

The won closed Friday’s night session at 1,366.5 per dollar, its strongest level since Oct. 16, when it hit 1,364.5, according to the Seoul foreign exchange market on Sunday. The rally marked a 2.45 percent weekly advance — the most among major currencies — surpassing the Japanese yen, Swiss franc, British pound and euro.

Analysts say the ascent reflects a broader shift away from the dollar, which has shown signs of weakness as markets grow increasingly wary of U.S. fiscal policy and the country’s political direction. The dollar index, which tracks the greenback against six major currencies, fell to 99.05 on Friday, dipping below the symbolic 100 threshold for the third consecutive session — a level not consistently seen since early 2022.

Uncertainty surrounding the Trump administration’s policies and rising concerns over the U.S. fiscal deficit weaken trust in the dollar. Even the U.S. national credit rating has been downgraded by Moody’s, increasing market anxiety.

"The move took its decline for the week to 2 percent, the biggest drop for six weeks, as Trump’s tax bill added to concerns over rising U.S. debt levels," The Financial Times reported. "That has come as some investors question whether to reduce their huge overweight positions in dollar assets, on concerns about erratic policymaking and the president’s trade war."

U.S. President Donald Trump holds the 2025 National Trade Estimate Report on Foreign Trade Barriers by the Office of the United States Trade Representative during an event to announce new tariffs at the White House on April 2 in Washington. [AP/YONHAP]

Won outperforms expectations

Against this backdrop, the Korean won emerged as a standout performer.

According to Yonhap Infomax, the won appreciated 2.45 percent against the dollar during the past week based on the Friday night closing price. This outpaces the Japanese yen at 2.13 percent, Swiss franc at 2.07 percent, British pound at 1.94 percent, EU euro at 1.77 percent and Canadian dollar at 1.69 percent during the same period.

Even compared to a month ago, the won’s 5.36 percent advance is the largest. Among the 10 most-used currencies in international transactions, based on Society for Worldwide Interbank Financial Telecommunication (Swift) data, none appreciated more than the won.

Reports that Korea and the United States are negotiating exchange rates lead the market to expect a stronger won. The perception is that the United States has requested a stronger won to improve its trade balance.

“Although the United States appears not to be making unreasonable demands on exchange rates while negotiating with multiple countries, the market maintains expectations because President Trump is aware of the prolonged strong-dollar situation,” said Baek Seok-hyun, an economist at Shinhan Bank.

Analysts expect the won to continue rising. If President Trump’s large-scale tax cut plan materializes, concerns over a widening U.S. fiscal deficit may grow. Bloomberg recently reports that, compared to the 10-year average, the Korean won, Indonesian rupiah, Taiwan dollar and Indian rupee are undervalued currencies.

“Fears that the tax cut plan could deepen the U.S. fiscal deficit are weighing on the dollar,” said Oh Jae-young, a researcher at KB Securities. “If current political and trade-related pressure for a stronger won continues, the won could rise to the low 1,300s per dollar."

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY JEONG JIN-HO [[email protected]]