Average about 70 won above global financial crisis peak; rate has stayed above 1,500 for 23 consecutive trading days

The won-dollar exchange rate, Kospi and Kosdaq are displayed on an electronic board at Hana Bank's headquarters dealing room in Jung-gu, Seoul, on Friday. [Yonhap]
The won-dollar exchange rate, Kospi and Kosdaq are displayed on an electronic board at Hana Bank's headquarters dealing room in Jung-gu, Seoul, on Friday. [Yonhap]

The average won-dollar exchange rate for June has surpassed 1,520 won, reaching its highest level since the 1997-98 currency crisis.

According to the Bank of Korea's economic statistics system, the average closing rate for weekday trading — measured at 3:30 p.m. — stood at 1,521.4 won per dollar from the start of the month through Friday.

Compared with historical monthly averages, that is the highest reading in 28 years and four months, since February 1998, when the rate hit 1,626.7 won at the height of the Asian financial crisis.

It is also about 70 won above the 1,453.3 won average recorded in March 2009, the peak during and after the global financial crisis.

Even in March of this year, when the rate surged immediately after the outbreak of the Middle East war, the monthly average reached only 1,492.5 won — still below the 1,500 mark — making the current run all the more exceptional.

The rate has now stayed above 1,500 won for 23 consecutive trading days since closing at 1,500.8 won on June 15. That is the longest such streak since the currency crisis period from Dec. 30, 1997, to March 13, 1998, when the rate remained above 1,500 for 49 consecutive trading days.

Multiple factors appear to be driving the recent won weakness.

Chief among them, the Federal Open Market Committee signaled on June 18 the possibility of future benchmark interest rate hikes, citing inflation concerns, bolstering the dollar.

The dollar index — which measures the greenback against a basket of six major currencies — climbed as high as 101.123 during trading on Friday, its highest intraday level in 13 months since May 16 last year, when it reached 101.256.

The index had bottomed out at 97.620 intraday on May 6 before gradually recovering, surpassing the 100 threshold from June 17 onward.

Stalled working-level negotiations between the United States and Iran — despite a broad agreement on ending the war — are also cited as a factor adding upward pressure on the exchange rate.

Foreign capital outflows driven by sharp stock market gains also appear to be continuing to weigh on the won.

Foreign investors have net sold 120.212 trillion won (about $78.9 billion) worth of domestic shares on the main bourse from the start of the year through Friday. Net selling this month alone has exceeded 20 trillion won.

Despite the selling, the foreign ownership ratio in the Korean stock market has actually risen nearly 5 percentage points, from 36.27 percent at the end of last year to 41.03 percent on Friday — reflecting sharp price gains in stocks that foreign investors predominantly hold.

Concerns are growing that the won could remain entrenched above 1,500 for some time as further foreign capital outflows continue to weigh on the currency.

"Exporters are holding back on converting their dollars, while individuals and institutions are expanding overseas investment — all while foreign capital keeps flowing out," said Park Hyung-joong, an economist at Woori Bank. "There is a possibility the rate stays above 1,500 through the third quarter."


anju1015@heraldcorp.com