Korean won seen rebounding after Yoon’s impeachment

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 eased political uncertainty over Asia's No. 4 economy, said foreign exchange analysts on Sunday.

Even so, the US Fed’s rate moves and Donald Trump’s tariff policy in his second term put 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 against the greenback in 2025 after pricing in the 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 (for the won) to rebound to its 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,” she added.

After Yoon’s imposition of martial law on Dec. 3, which lasted but a few hours, the won briefly broke above the 1,440 level against the dollar in overnight trading.

In domestic trading, it has hovered around 1,430, its weakest point since late October 2022, when it softened to 1,444. It was out of sync with major currencies, which stayed firm against the greenback.

The day before the impeachment vote, the Korean currency closed domestic trading at 1,433.4. 

Analysts observed that the won had avoided worst-case scenarios. If parliament had failed to suspend Yoon from his duties, the won could have weakened to 1,480. If Yoon had declared martial law a second time, the dollar/won rate could have soared as high as 1,550, they said.

Kwon Amin, an analyst at NH Investment & Securities Co., was more upbeat 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., offered a downbeat outlook. He noted 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 currencies after the Fed makes another rate cut this month, which will lead to economic growth and price increases,” said Kim.

Write to Jin-gyu Kang at joseph@hankyung.com
 

Yeonhee Kim edited this article.