Won-dollar uncertainty wreaking havoc with company plans

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Won-dollar uncertainty wreaking havoc with company plans

Published: 13 Nov. 2025, 14:17 Updated: 13 Nov. 2025, 18:44

Audio report: written by reporters, read by AI

The won-dollar exchange rate is seen on an electronic display board at Hana Bank's trading room in Jung District, central Seoul on Nov. 13. [NEWS1]

As the exchange rate currently hovers at the weaker end of the 1,400 won-to-dollar range, Korean companies are scrambling to finalize next year’s business plans amid volatile currency swings that threaten to erode profits, deepen cost pressures for importers and expose small firms to mounting financial strain.

A manager who works in the finance team of a domestic confectionery company is struggling to finalize next year’s business plan — largely due to the exchange rate.

The company relies on imports for nearly half its raw materials, including flour, corn, soybeans and sugar. A major deviation in exchange rate forecasts can severely disrupt business planning.

“Every time the exchange rate swings by 10 won, our operating profit fluctuates by billions of won,” the manager said. “We’re currently drafting a business plan based on three exchange rate scenarios.”

As of noon Wednesday, the won-dollar exchange rate hit 1,470 won in Seoul’s foreign exchange market. That marks the lowest value for the won against the dollar in about seven months since April 10. The won has largely held steady, quoted at 1,467.7 per dollar at 3:30 p.m. on Thursday. The current trend of a weakening won shows no sign of slowing after breaching the 1,400-won mark in late September.

Bank of Korea Governor Rhee Chang-yong, in an interview with Bloomberg TV Wednesday, said that the foreign exchange market is overreacting to uncertainty, attributing the won’s weakness to external factors. He added that if volatility increases, authorities may intervene.

November is typically when companies are deep into planning for the following year. The exchange rate, a key variable for both exporters and importers, has become a critical point of concern.

People are seen inside a currency exchange office in Myeongdong, Jung District, central Seoul on Nov. 11. [YONHAP]

“We buy steel materials from China in U.S. dollars, and the surge in prices has made it scary to even check the exchange rate,” said a head of a ship parts company in Busan. “When the won fluctuates like this, foreign exchange losses alone can reach hundreds of millions of won. I’m starting to wonder whether planning for next year is even meaningful.”

Adding to the unease is a kind of trauma from a year ago, when companies were drawing up their 2025 business plans.

The most common forecast for the exchange rate among the top 50 companies late last year was 1,350 to 1,400 won per dollar, cited by 33.3 percent of firms, according to a January analysis by the Korea Chamber of Commerce and Industry. Another 29.6 percent expected 1,300 to 1,350 won. Only 11.1 percent of Korean companies predicted the current range of 1,450 to 1,500 won.

The average exchange rate from January to this week has been 1,414 won per dollar, meaning that three out of four companies missed the mark with their forecasts.

“The exchange rate only stayed in the 1,300-won range for about three months — from May to July,” said an executive at electronics company. “We’ve struggled all year because of the currency, and we’re worried next year’s forecast might be off by just much.”

Bank of Korea (BOK) Governor Rhee Chang-yong speaks during a policy conference at the BOK headquarters in Jung District, central Seoul on Nov. 4. [NEWS1]

The implications of a 1,200-won, 1,300-won or 1,400-won exchange rate are vastly different. While this varies by product, exchange rates above 1,200 won are generally where negative impacts of a weak won become significant for importers.

Once the rate hits 1,300 won, the depreciation of the won accelerates. At the 1,400-won level, the situation is considered by many to be a crisis — at least in currency terms.

“Since the beginning of U.S. President Donald Trump's second term, the strong dollar has been steady, and the gap between the U.S. and Korea's benchmark interest rates, currently 1.5 percentage points at the upper bound, remains, so there’s little to reverse the current trend of a strong dollar,” said Baek Seok-hyun, a researcher at Shinhan Bank, said,

The spread between the won-dollar exchange rate’s highest and lowest points this year has reached 136 won. This volatility itself has become a source of external uncertainty. If companies set next year’s business targets based on the current 1,400-won level and the won strengthens, they could suffer foreign exchange losses even if they meet export targets.

A person is seen exchanging money at a currency exchange office in Myeongdong, Jung District, central Seoul on Nov. 11. [NEWS1]

Conversely, if they plan based on a lower rate and the won weakens further, they will be forced to pay higher prices for imported raw materials.

The effect of a weak won varies by industry. For every 10-won increase in the exchange rate, exporters see their operating profit rise by an average of 0.5 to 1 percent, according to the Korea International Trade Association. But for companies heavily dependent on imports, profits shrink by 1 to 1.5 percent. Moreover, the trickle-down effect of a weak won is not as strong as it once was.

“A weaker won is generally seen as beneficial for Korea’s export-driven economy, but the impact is now limited,” said Kang Seok-gu, head of research at the Korea Chamber of Commerce and Industry. “Overseas production has increased, and more deals are settled in dollars with hedging measures in place.”

“Industries with high dollar-denominated sales like shipbuilding, shipping and automobiles tend to benefit from a weak won,” said Chang Sang-sik, a researcher at the Korea International Trade Association. “But sectors that rely heavily on imported raw materials, such as petrochemicals and steel, face growing cost burdens.”

A bank official holds U.S. dollars at a Hana Bank branch in central Seoul on Nov. 5. [YONHAP]

“For semiconductors and home appliances, which have high shares of overseas sales and local production, the benefits and drawbacks must be weighed carefully, since these industries also face rising costs for imported parts,” Chang added.

A weak won tends to hit the weakest links first. Large corporations like Samsung Electronics and Hyundai Motor, which have numerous overseas production sites, are generally equipped to weather currency fluctuations. But small and midsize companies — about 90 percent of which import intermediate goods and process them for sale to large firms or export — are more vulnerable.

Even if import costs rise, smaller firms cannot fully reflect that increase in their selling prices to larger clients or export buyers.

If the exchange rate increases by 10 percent, large firms see their operating margin fall by 0.29 percentage points, whereas small firms experience a 0.36 percentage point decline with just a 1 percent increase, according to the Korea Institute for Industrial Economics & Trade (KIET).

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM KI-HWAN [[email protected]]