With the exchange rate failing to drop below the 1,400 won level for 29 consecutive trading days, the 1,500 won range is effectively becoming the new normal.
As the exodus of foreign capital is cited as the primary factor behind the rising exchange rate, analysts suggest that it is difficult to expect a resolution to the downward pressure on the won in the short term due to the high possibility of further capital outflows.
From April 1 to June 26 of this year, the average won-dollar exchange rate based on daytime closing prices was recorded at 1,500.1 won.
Unless the exchange rate drops sharply early this week, the average exchange rate for the second quarter (April to June) is also expected to exceed 1,500 won.
This marks the first time in 28 years and 3 months that the quarterly average exchange rate has reached the 1,500 won level, since the first quarter of 1998 (1,596.8 won) during the Asian financial crisis.
Even in the first quarter of 2009 (1,418.3 won), when the exchange rate soared due to the global financial crisis, it remained well below 1,500 won.
Compared to the first quarter of last year (1,452.9 won), when the impact of U.S. reciprocal tariffs was significant, the fourth quarter of last year (1,451.9 won), when supply and demand imbalances in the foreign exchange market widened, and the first quarter of this year (1,466.9 won), when the Middle East war broke out, the average has risen by 40 to 50 won.
The exchange rate at airport currency exchange counters reached 1,600.1 won as of yesterday afternoon, based on KB Kookmin Bank, surpassing the 1,600 won mark.
The core reason for the weakness of the won is pointed to as the massive net selling of domestic stocks by foreign investors.
Foreigners have net sold 136.7841 trillion won worth of domestic stocks in the KOSPI market from the beginning of this year through June 26.
This month alone, they have maintained a net selling streak totaling nearly 37 trillion won.
This is a significant amount even when compared to the record-high current account surplus.
In its economic outlook released last May, the Bank of Korea projected that this year's current account surplus would reach 250 billion dollars, an increase of approximately 130 billion dollars annually from last year (123.1 billion dollars), but foreigners have already net sold about 89 billion dollars in the first half alone.
The prevailing view is that the foreign capital outflow, interpreted as portfolio rebalancing following the rise in domestic stock prices, is highly likely to continue for some time.
The securities industry estimates that the potential for further foreign net selling ranges from 100 trillion to 150 trillion won.
Despite the continuous selling of stocks by foreigners, their stake in the KOSPI market actually rose by more than 5 percentage points from 36.28 percent at the end of last year to 41.42 percent on June 26.
This is because the stock prices of large-cap companies, which are primarily held by foreigners, have risen sharply.
The strength of the dollar, driven by receding expectations for U.S. interest rate cuts, is further exacerbating the downward pressure on the won.
The dollar index, which measures the value of the dollar against the currencies of six major countries, soared to 101.798 during trading on the 24th, hitting its highest level in 13 months since May 12 of last year (101.974).
The U.S. Personal Consumption Expenditures (PCE) price index growth rate for May, announced on the 25th, was 4.1 percent, the highest in 3 years and 1 month since April 2023 (4.5 percent).
Although oil prices have fallen this month, the dollar could strengthen further if U.S. employment indicators or consumer inflation rates for July continue to support interest rate hikes.
The won is also showing a tendency to move in tandem with the weakness of the Japanese yen.
The yen-dollar exchange rate rose to 161.939 yen during trading on the 25th, marking the highest level in 1 year and 11 months since July 3, 2024 (161.950 yen).
Although the Bank of Japan, the country's central bank, raised its benchmark interest rate by 0.25 percentage points to around 1 percent on the 16th—the highest level in 31 years since September 1995—the yen has not been able to escape its weakness.
Some anticipate a decline in the exchange rate after SK Hynix lists American Depositary Receipts (ADRs) worth approximately 30 billion dollars on the Nasdaq on the 10th of next month.
There is a hopeful outlook that if SK Hynix brings a large amount of the dollars raised in the U.S. into Korea, it will provide some breathing room for supply and demand.
Conversely, it is also pointed out that if foreigners who have held SK Hynix shares in the KOSPI market sell them and switch to the ADRs listed on the Nasdaq, dollar outflows could increase accordingly.
Starting from the 6th of next month, the won-dollar exchange rate will be traded 24 hours a day in the Seoul foreign exchange market.
The current trading hours, which run from 9:00 a.m. to 2:00 a.m. the following day, will change to run from 6:00 a.m. Monday to 6:00 a.m. Saturday (based on daylight saving time).
Trading will take place even on public holidays, excluding weekends and January 1.
The daily opening price and the intraday high and low exchange rates will also be calculated based on the period from 6:00 a.m. to 6:00 a.m. the following day, while official statistics will continue to be based on the current daytime trading closing time of 3:30 p.m.
This institutional change was promoted to resolve gaps in foreign exchange trading while improving convenience for domestic and foreign investors and import/export companies, and reducing transaction costs.
In its 2026 annual market classification results released on the 23rd (local time), MSCI did not place South Korea on its watch list for developed market status, citing, among other reasons, that the convertibility of the won in the offshore foreign exchange market remains limited.
There are observations that if investors in the overseas non-deliverable forward (NDF) market refer to the Seoul foreign exchange market rate late at night, sudden spikes in the exchange rate could be reduced.