The KRW/USD exchange rate has been rising steadily and is now approaching the 1,400 KRW level once again.

On October 28, the won-dollar rate surged past 1,390 before settling back in the mid-1,380s as the market closed. Concerns among economic and foreign exchange experts suggest that ongoing global risk aversion, amplified by geopolitical factors such as Israel’s recent airstrikes on Iranian military installations, could push the dollar’s strength higher as investors seek safe assets like the dollar and gold.

The exchange rate in Seoul’s foreign exchange market closed at 1,385.0 KRW to the USD, a 3.7 KRW decrease from the previous trading day. After opening at 1,390.5, it hit a high of 1,391.5 in early trading, the highest intraday rate since July.

Several factors drive the dollar’s current strength, including the likelihood of former President Donald Trump’s victory in the November 5 election. Experts suggest that a potential Trump win could introduce inflationary pressures due to anticipated increases in fiscal spending and protectionist trade policies, bolstering the dollar.

Another contributor is the resilience of U.S. economic indicators, coupled with hawkish comments from Federal Reserve officials, which have diminished expectations for further U.S. interest rate cuts.

Given that the Korean won is not a global reserve currency, it’s especially susceptible to fluctuations in the dollar’s strength. Additionally, Korea’s own economic slowdown further diminishes opportunities for a won-dollar exchange rate reversal, as currency values are often linked to national economic performance.

This “King Dollar” phase has become a financial strain for Korean expatriates and students in the United States, who face higher remittance costs as the KRW depreciates. Korean travelers to the U.S. are also feeling the pinch with increased travel expenses. Conversely, this dollar strength benefits Korean-American visitors who experience greater purchasing power in Korea.

Meanwhile, the U.S. Treasury yields are rising again, bringing the dollar index (DXY), which measures the dollar’s value against six major currencies, up to 104.26 from 104.1.

— Reporter Hwandong Cho

<Hwandong Cho>