Won/Dollar Exchange rate Experiences Turbulent Month

The South Korean Won experienced notable fluctuations against the US dollar in April, primarily driven by anxieties surrounding potential US trade policies. Data released by the Bank of Korea (BOK) this sunday reveals a sharp increase in the currency’s volatility.

Highest Fluctuation Since Late 2022

The BOK’s analysis indicates that the average daily movement in the Won/dollar exchange rate reached 9.7 Won, or 0.9%, during april. This level of instability marks the highest point since November 2022, when fluctuations hit 12.3 won (also 0.9%) amidst speculation about a possible shift in US Federal Reserve monetary policy. To provide context,recent data from the International Monetary Fund (IMF) shows that emerging market currencies,in general,have faced increased volatility due to global economic uncertainties.

Impact of US Customs Rights on Currency weakening

The April figures represent a considerable increase compared to the previous month’s 4.3 Won (0.29%) fluctuation. Notably, the South Korean currency weakened to 1,487.6 Won per dollar on April 9th,coinciding wiht the date when reciprocal American customs duties targeting the country were initially implemented. This highlights the immediate impact of trade policy announcements on currency valuation.

Brief Respite Followed by Continued Uncertainty

However, the exchange rate saw a rebound to 1,420 Won just two days later, following an announcement by US President Donald Trump of a 90-day suspension of these reciprocal customs duties. Despite this temporary reprieve, experts anticipate ongoing volatility, with the exchange rate expected to hover around 1,400 Won, contingent on the progress of trade negotiations between Washington and Beijing. This ongoing uncertainty underscores the sensitivity of the Korean Won to global trade dynamics.

Expert Analysis: The Role of Trade Negotiations

According to Moon Jeong-Hee, an economist at KB Kookmin Bank, the Korean Won being strongly correlated with other asian currencies, including the Chinese Yuan, the outcome of the trade negotiations between the United States and China will be crucial. This statement emphasizes the interconnectedness of Asian currencies and the significant influence of US-China trade relations on the Korean Won’s stability. The current trade tensions between the US and China, involving tariffs on billions of dollars worth of goods, continue to cast a shadow over regional economies.

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