- Korean won strengthened against USD, reaching 1430s range for first time in a month.
- Market stability improved as Trump’s immediate tariff actions were less severe than anticipated.
- Exchange rate volatility linked to potential US trade policies affecting global markets.
- Japanese firm Nomura revised its previous 1500 won/dollar forecast downward.
- Korean bond yields decreased across different maturity periods, indicating positive market sentiment.
The South Korean won appreciated against the US dollar, reaching 1439.50 won per dollar on January 21st, marking a 12.20 won increase in value. This movement represents the strongest position for the Korean currency since December 18th.
Market Response to Trade Policy
The currency market displayed heightened sensitivity to US trade policy developments. Early trading saw the won strengthen to 1432.90 after initial concerns about immediate tariff implementation subsided. However, the rate fluctuated to 1443.90 following discussions about potential 25% tariffs on Mexico and Canada.
Lee Joo-won, economist at Daishin Securities, stated: “The absence of universal tariffs on day one reduced market anxiety, though volatility may increase as trade policy investigations progress.”
Exchange Rate Outlook
Financial analysts are revising their projections downward. Nomura Securities modified its previous forecast, suggesting reduced likelihood of the won-dollar rate reaching 1500. Market experts project potential movement into the 1300s range by year’s end, contingent on moderate US trade policies.
Domestic Market Impact
The currency stabilization has influenced Korean monetary policy expectations. The Bank of Korea‘s recent rate hold decision might shift toward easing in February, supported by improving exchange rate conditions.
Government bond markets reflected this outlook, with three-year yields declining 0.044 percentage points to 2.579%. The KOSPI index showed minimal movement, closing at 2518.03, while the tech-heavy KOSDAQ finished at 726.07.
Lee Jae-won from Shinhan Investment Corp. noted: “Foreign investors shifted to net selling positions following tariff announcements, creating downward pressure on equities.”
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