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Won falls to 5-month low amid heightened U.S.-China trade tensions

Published: 13 Oct. 2025, 18:21 Updated: 13 Oct. 2025, 18:45

JIN MIN-JI
[email protected]

A currency trader passes by a screen showing the Kospi, top left, and the foreign exchange rate between the U.S. dollar and Korean won at the foreign exchange dealing room of the Hana Bank headquarters in Seoul on Oct. 13. [AP/ YONHAP]

The Korean won nose-dived to its weakest level in more than five months against the greenback on Monday amid renewed U.S.-China trade tensions, prompting a verbal intervention by the finance ministry.

The won touched above 1,430 and was quoted at 1,425.8 at 3:30 p.m., up 0.3 percent from the previous session's close.

“The foreign exchange authorities are closely monitoring the market with a sense of caution, as the volatility of the Korean won has increased recently due to both domestic and external factors, raising concerns over potential one-sided movement in the market,” said the finance ministry.

It was the first verbal intervention since April of last year.

The won climbed back to the 1,400 mark last month and has remained at that level amid various uncertainties, including the U.S. government shutdown, which could delay the Fed’s rate cuts and keep the dollar strong — thereby putting continued pressure on the won.

Most recently, Washington threatened to impose an additional 100 percent tariff on Chinese goods starting Nov. 1, after Beijing announced it would dramatically expand its rare earth export controls ahead of a scheduled face-to-face meeting between Presidents Donald Trump and Xi Jinping in Korea at the end of October.

China produces more than 90 percent of the world's processed rare earths and rare earth magnets.

A person exchanges money at a currency exchange booth in Myeong-dong, central Seoul on Oct. 13. [NEWS1]

The unresolved issue of how Korea will finance its pledged $350 billion investment in the United States has also kept won weak against the greenback. Seoul and Washington have discussed a possible won-dollar currency swap, as Korea is concerned about a potential surge in dollar outflows triggered by the investment.

However, no such agreement was included in the latest deal announced earlier this month between the two countries, except that Korea would provide the United States with detailed monthly data on its foreign exchange transactions and restrict market intervention to periods of excessive volatility.

“Despite the continued weakness of the Korean won since April, foreign investors have remained net buyers of Korean assets,” said Kim Doo-un, an analyst at Hana Securities. “This year’s weakness in the won is driven more by uncertainties surrounding Trump-related policies than by changes in the dollar’s value or Korea’s economic fundamentals.”

A weak won could create inflationary pressure on imported goods, potentially delaying the Bank of Korea’s rate cuts. This would raise corporate borrowing costs and dampen consumption, putting downward pressure on the stock market, Kim added. A weaker won could also prompt foreign investors to sell Korean assets, leading to capital outflows.

Citing external factors, NH Investment & Securities raised its fourth-quarter exchange rate forecast to 1,380 won from the previous estimate of 1,350 won.

The rate could be further influenced by potential talks between Finance Minister Koo Yun-cheol and U.S. Treasury Secretary Scott Bessent on Wednesday, as Korea and the United States are still discussing diverse ways to set up a bilateral foreign exchange swap line, Koo stated on Monday. The release of the U.S. September consumer inflation report on Oct. 24 could also take a toll on the rate, said Kwon Ah-min, an analyst at NH Investment & Securities.

BY JIN MIN-JI [[email protected]]