Korean currency gains amid Trump's calls for lower rates, oil prices

A trader walks past electronic boards in a dealing room of Hana Bank in Seoul, Friday. Yonhap

By Lee Kyung-min

• Published Jan 24, 2025 4:50 PM KST
• Updated Jan 26, 2025 2:25 PM KST

The Korean currency is strengthening against the dollar, boosted by U.S. President Donald Trump’s comments on the need for a Federal Reserve rate cut and low oil prices, market watchers said Friday.

Further sapping the strength of the global reserve currency is the expectation of and actual rate hike by the Bank of Japan's (BOJ) to its highest level in 17 years later in the day. The BOJ hiked the key rate to 0.5 percent from 0.25 percent, in line with market consensus. Also at play is the tempered push on tariffs under the second Trump administration, a factor for a weaker dollar.

Nonetheless, market watchers say the Korean currency will not appreciate to greater than 1,430 won against the dollar, hobbled by prolonged lackluster offshore investor sentiment toward the Korean equity market.

According to the foreign exchange market data, the Korean currency traded at around 1,435 won per dollar at around 9:15 p.m., a gain of 2 won compared to the previous session’s 3:30 p.m. closing price of 1,437.30 won.

Friday’s figure surpassed the previous month-to-date high, Tuesday, a significant stabilization from earlier this month when the won plunged to around 1,470 won, buffeted by the Dec. 3 martial law fiasco and the global reign of the strong dollar.

“The value of the Korean currency is expected to inch up for the time being, aided by the receding power of the reign of the U.S. dollar,” Standard Chartered Bank Korea senior investment strategist Hong Dong-hee said.

Underpinning the optimism is U.S. President Donald Trump’s comment during the World Economic Forum in Davos, Switzerland, Thursday (local time).

“With oil prices going down, I'll demand that interest rates drop immediately, and likewise they should be dropping all over the world," he said during a White House event.

“I think I know interest rates much better than they do, and I think I know it certainly much better than the one who's primarily in charge of making that decision," he said in an apparent reference to Fed Chair Jerome Powell.

The comments moved the market since they came less than a week before the Fed’s rate-setting FOMC meeting scheduled for Jan. 28 and 29.

Trump also said he would push the Organization of the Petroleum Exporting Countries (OPEC) including Saudi Arabia to cut their oil prices.

"You gotta bring down the oil price. That will end that war. You could end that war," he added.

Also factored in, Hong added, is the appreciation of the Japanese yen on expectations of a BOK rate hike to 0.5 percent, a 25-basis-point increase from 0.25 percent.

“The won will stabilize to the 1,430 won range, moving in part in sync with the Japanese global reserve currency. No shock factors are in place since specifics on the tariff policies remain uncertain,” Hong said.

Financial Supervisory Service Governor Lee Bok-hyun said, also on Friday, the probability of a sudden unwinding of the yen carry trade following the BOJ rate hike was limited, dispelling market jitters.

However, he voiced concerns over heightened market volatility ahead of the upcoming Lunar New Year holiday, potentially triggered by the monetary policy path of the Fed and the European Central Bank, as well as U.S. inflation data.

"Market developments should be closely monitored during the holiday next week. Please make sure the response teams are fully prepared," he said.