Skip to content
  • KOSPI 2746.63 +0.81 +0.03%
  • KOSDAQ 905.50 -4.55 -0.50%
  • KOSPI200 374.63 +1.41 +0.38%
  • USD/KRW 1348 -3 -0.22%
  • JPY100/KRW 890.59 -1.84 -0.21%
  • EUR/KRW 1452.47 -5.06 -0.35%
  • CNH/KRW 185.74 -0.29 -0.16%
View Market Snapshot
Foreign exchange

Korean won hits 19-month high; all eyes on US election

By Oct 21, 2020 (Gmt+09:00)

2 Min read

The South Korean won is riding high against the dollar amid expectations of a new US stimulus package, as presidential candidate Joe Biden’s likely victory in the upcoming US election is expected to provide a tailwind, pushing the currency’s value further higher.

On Seoul’s foreign-exchange market on Oct. 21, the dollar/won rate was quoted at 1,131.9 per dollar at close, down 7.5 won from the previous day. In terms of the value of the won, Wednesday’s close marked the Korean currency’s strongest finish versus the greenback in 19 months.

The won slumped to as low as 1,285.7 in mid-March, hit by the fallout of the COVID-19 outbreak. But the local currency has quickly clawed back, particularly since August, boosted by signs of an economic recovery and in line with the gains of the Chinese yuan.

The Korean won is hovering around its 19-month high versus the dollar, tracking the yuan's gains.
The Korean won is hovering around its 19-month high versus the dollar, tracking the yuan's gains.

STELLAR PERFORMANCE

The Korean currency has performed remarkably of late, posting the highest gain among the world’s 13 major currencies since late August.

The won has advanced 3.5% against the dollar since the end of August, followed by the South African rand’s 2.8% rise, the Mexican peso’s 2.5% gain and the Chinese yuan’s 1.6% rise.

A key driving force behind the won’s strength is the rise of the yuan, which recently hit a 27-month high versus the dollar in offshore markets on its economy’s sooner-than-expected recovery from the coronavirus slump.

The world’s second-largest economy’s gross domestic product expanded 4.9% in the third quarter from a year earlier after posting a 6.8% contraction in the first quarter, according to government data released on Monday.

The won closely follows the movement of the yuan as China is Korea’s biggest trading partner, accounting for more than a quarter of Korean exports.

The won’s recent gains were also propelled by expectations of imminent economy-boosting measures by the US government.

The US dollar dipped on Tuesday, hitting a one-month low against a basket of major currencies, as investors awaited the outcome of fiscal stimulus talks ahead of the November US presidential election. House Speaker Nancy Pelosi said she was optimistic Democrats could reach a deal with the Trump administration soon.

Korean won hits 19-month high; all eyes on US election

BIDEN WIN TAILWIND FOR WON

Market watchers say the won’s upward trend will continue if Democratic nominee Joe Biden wins the race, as he has promised to spend $2 trillion to address climate change during his term if elected.

His less hostile policy toward China would also help ease trade frictions between the two countries, thus boosting the yuan, which moves in tandem with other regional currencies, including the won.

Another positive driving the won is the expectation of a coronavirus vaccine available in the near term.

“If vaccines are available soon, that will whet the risk appetite among currency traders. The dollar’s weakness could last until the end of the year,” said a foreign-exchange market analyst.

Analysts expect a Biden win and a successful vaccine development to push the dollar/won pair down to the 1,100 won range.

Write to Ik-Hwan Kim at lovepen@hankyung.com
In-Soo Nam edited this article.
Comment 0
0/300