Why Is the Won Falling Despite Record Exports? Exchange Rate Hits 17-Year High

[Anchor]

Despite record-breaking exports leading to an increased inflow of foreign currency, the exchange rate continues to rise. Today, July 1, the won-dollar exchange rate hit its highest level in 17 years, not seen since the 2009 global financial crisis.

Lee Tae-gwon reports.

[Reporter]

The won-dollar exchange rate soared to as high as 1,559 won during morning trading today.

Although it retreated slightly following suspected intervention by foreign exchange authorities, it closed the daytime session at 1,554 won, up 5.5 won.

This marks the highest level in 17 years and three months since March 5, 2009, during the global financial crisis.

The average exchange rate for the first half of this year was 1,484 won, the highest since the first half of 1998, when it reached 1,494 won during the Asian financial crisis.

Despite efforts to attract dollars, such as creating accounts for retail investors returning to U.S. stocks and the RIA (Registered Investment Advisor) system, as well as injecting 45.3 billion dollars into the market over the past six quarters, these measures have proven insufficient to stop the rise in the exchange rate.

[Interview: Jeon Kyu-yeon, Research Analyst at Hana Securities]
"Since we cannot keep depleting our foreign exchange reserves, interventions must be meaningful. However, even when we do intervene, it only serves to cap the upper limit..."

The primary reason cited is the surge in demand for dollars as foreign investors significantly adjust their portfolios amid the domestic stock market boom.

Foreigners net sold 150 trillion won worth of KOSPI stocks in the first half of the year alone, and have continued to net sell for nine consecutive trading days.

Investment fervor for the U.S. market, fueled by the Nvidia craze followed by SpaceX and high-leverage semiconductor products, shows no signs of cooling.

Over the past year, South Korea recorded a current account surplus of 177.9 billion dollars. However, with 112.1 billion dollars in overseas investments by locals and 44.8 billion dollars in net stock sales by foreigners, the net supply of foreign currency was limited to 21 billion dollars.

[Interview: Min Gyeong-won, Economist at Woori Bank]
"South Korea is no longer a country where foreign exchange market supply and demand depend solely on the current account; the flow of dollars through financial markets has become much more important. The amount of dollars entering through the financial account is significantly larger."

Recently, the strong dollar phenomenon, triggered by signals of U.S. interest rate hikes, has compounded the situation.

Analysts also point out that the yen-dollar exchange rate reaching a 40-year high of 162 yen has exacerbated the weakness of the won, as it is often grouped with other Asian currencies.

With external factors beyond the government's control piling up, forecasts suggest that the structural weakness of the won will persist.

(Reported by Park Jin-ho | Video by Kim Jong-mi | Graphics by Jeon Yu-geun and Choi Jae-young)
※ Please note: This article was translated by AI and may contain errors.