Korean Won Sinks to 17-Year Low as 100 Trillion Won Capital Outflow Drives 1,517.2 Close
Updated
Updated · The Korea JoongAng Daily · May 26
Korean Won Sinks to 17-Year Low as 100 Trillion Won Capital Outflow Drives 1,517.2 Close
1 articles · Updated · The Korea JoongAng Daily · May 26
At 1,517.2 per dollar on Friday, the won hit its weakest close in years, while its real effective exchange rate fell to 85.06 in April—the lowest since March 2009.
100 trillion won in capital outflows has driven much of the slide, with foreign investors selling Korean stocks, converting proceeds into dollars and taking funds abroad; net Kospi sales reached 93.2235 trillion won this year.
The weakness has persisted despite a $73.78 billion first-quarter current account surplus and a Kospi rally above 8,000 intraday, suggesting the move reflects capital flight more than a simple strong-dollar story.
Officials have called the currency drop an "unavoidable cost" of Korea's economic rise and said it does not reflect a foreign-currency shortage, though authorities also warned recent exchange-rate moves were excessive.
Higher oil prices, possible renewed Fed tightening and Korea's structural growth and demographic strains could keep the won under pressure, raising import costs and inflation risks for households and small businesses.
Amid a stock surge and currency crisis, is Korea a golden investment opportunity or a dangerous trap?
Can market reforms stabilize the won, or are structural issues like an aging population sealing its fate?
South Korean Won Hits 17-Year Low: Causes, Economic Fallout, and Policy Responses
Overview
The South Korean won has recently plunged, with the exchange rate nearing 1,520 won per dollar, prompting authorities to call the fluctuations excessive. This sharp depreciation is mainly driven by a mix of geopolitical tensions, especially the Iran war, and changing global monetary policy expectations. Fears that Iran might close the Strait of Hormuz have raised concerns about surging oil prices, exposing South Korea’s heavy reliance on Middle Eastern crude oil. These factors highlight the vulnerability of the Korean economy, as higher energy costs and global uncertainty put additional pressure on the won and overall economic stability.