The South Korean won is expected to stage a rebound from its two-year low against the US dollar and hold steady in 2025 after the impeachment of South Korea’s President Yoon Suk Yeol in a parliamentary vote on Saturday reduced political uncertainty over Asia’s No. 4 economy, said foreign exchange analysts on Sunday.
Still, the US Fed’s rate moves and Donald Trump’s tariff policy in his second term add downward pressure on the Korean currency amid an economic slowdown.
But a majority of the analysts surveyed by The Korea Economic Daily on Sunday look past their worst-case scenarios and maintain their forecasts that the won will be steady to higher to the dollar in 2025 after pricing in Trump administration’s tariff policy.
“The (domestic) foreign exchange market is past its political uncertainty,” said Hye-yoon Lim, an economist at Hanwha Investment & Securities. “There is little likelihood of the dollar/won rate rising above 1,450.
“But to rebound to the pre-martial law level, there needs to be a sign of the domestic economy recovering. The exchange rate will likely stay around the low to mid-1,400 level for a while,” added she.
After Yoon’s martial law imposition on Dec. 3, which lasted a few hours, the won briefly broke above the 1,440 level to the dollar in the overnight trade market.
In domes trading, it has hovered around 1,430, its weakest point since late October 2022, when it softened to 1,444. That was out of sync with major currencies, which stayed firm against the greenback.
A day before his impeachment vote, the Korean currency closed domestic trade at 1,433.4.
Analysts noted the won avoided its worst-case scenarios. If parliament failed to suspend Yoon from his duties, the won might have weakened to 1,480. In case Yoon declares a second martial law, the dollar/won rate could have soared to 1,550, they said.
Kwon Amin, an analyst at NH Investment & Securities Co., is more optimistic than other analysts, saying: “There is a high likelihood of the (dollar/won) exchange rate stabilizing in the low to mid-1,300 won range next year.”
In contrast, Kim Chan-hee, a senior analyst at Shinhan Securities Co., gave a downbeat outlook. He pointed out that external economic conditions would outweigh domestic issues in the domestic foreign exchange market.
“The dollar will sustain its upward trend at a moderate pace against a basket of major currencie after the Fed makes another rate cut this month, which will lead to economic growth and price increases,” said Kim.
By Jin-gyu Kang
joseph@hankyung.com
Yeonhee Kim edited this article.
