Korean won falls to 16-year low as Trump tariffs go into effect

An electronic signboard at Hana Bank headquarters in Seoul shows the won-dollar exchange rate at 1,487.3 won per dollar and the benchmark KOSPI at 2,327.20 points during intraday trading, Wednesday. The Korean currency weakened by 10.9 won to close at 1,484.1 won per dollar while the KOSPI retreated 40.53 points, or 1.74 percent, to close at 2,293.70 points. Yonhap

The Korean currency weakened to the lowest level in more than 16 years against the U.S. dollar, Wednesday, as Donald Trump’s reciprocal tariffs took effects.

The won closed at 1,484.1 won per dollar on the daytime trading market, depreciating by 10.9 won from the previous day’s close. It was the lowest level since March 12, 2009, during the global financial crisis.

The won’s depreciation was largely attributable to a 25 percent tariff against Korea-manufactured goods, market analysts said.

The measure took effect at 1 p.m. in Seoul, triggering the Korean currency to slide further, inching closer to 1,500 won per dollar. The won had already slid nearly 40 won against the dollar on Tuesday from the previous day.

A possible breach of the 1,500 won level poses a more serious threat to the ailing Korean economy, as the level has only been surpassed during the 1997-98 Asian financial crisis, the 2008-09 global financial crisis and the COVID-19 pandemic.

“The currency market should brace for the possibility of the won-dollar exchange rate climbing over 1,500 won throughout the first half of the year,” KB Kookmin Bank researcher Lee Min-hyuk said.

Baek Seok-hyun, a Shinhan Bank analyst, echoed Lee's view.

“The bottom is open for the won-dollar rate to go over the 1,500 won level if the U.S.-China trade conflict does not let up,” he said, referring to an astounding 104 percent tariff imposed by the Trump administration against China.

The heightened U.S.-China tussle was also another reason behind the won’s steep fall against the dollar, as investors dumped stocks and other financial assets in Seoul in search of safe-haven assets.

The benchmark KOSPI retreated 40.53 points, or 1.74 percent, to close at 2,293.70 points, Wednesday.

Moreover, China’s possible devaluation of the yuan is adding to concerns over the further depreciation of the won, as the values of the Korean and Chinese currencies have been closely linked in recent years.

Market observers also said that a delay in Korea’s inclusion in the FTSE Russell's World Government Bond Index (WGBI) is anticipated to aggravate the foreign exchange market in Seoul.

The WGBI is a highly sought-after benchmark that would attract substantial capital inflows from global investors. The inclusion was scheduled for November this year, but was put off to April 2026, according to the Ministry of Economy and Finance.

In the meantime, the finance ministry and the Bank of Korea pledged to implement market stabilization measures swiftly when necessary, warning that the foreign exchange and financial markets could face heightened volatility for longer than expected.