Record High Exchange Rates Observed

The Korean won-U.S. dollar exchange rate has recently surged to nearly 1,500 won, marking the highest level since the global financial crisis. According to the Bank of Korea’s Economic Statistics System (ECOS) on Dec. 31, the average exchange rate for the fourth quarter of 2024, based on daily closing prices, was 1,398.75 won.

Historical Context

This is the highest level in 15 years and nine months since the first quarter of 2009 when the rate was 1,418.30 won during the financial crisis. The only higher period was the first quarter of 1998, when the exchange rate reached 1,596.88 won during the Asian financial crisis.

Quarterly Trends

Quarterly average exchange rates rose from 1,329.4 won in the first quarter of this year to 1,371.24 won in the second quarter. Although it dropped to 1,358.35 won in the third quarter, it rebounded to around 1,400 won in the fourth quarter.

Factors Influencing the Depreciation

The depreciation of the won was influenced by heightened political instability following Donald Trump’s reelection as U.S. president and the declaration of martial law this month. Speculation that the U.S. Federal Reserve would slow the pace of interest rate cuts also played a role.

Impact on Industries

Higher exchange rates typically affect dollar-denominated assets and liabilities, which can impact profitability. However, the effects vary by industry. Industries with a high proportion of exports, such as semiconductors, automobiles, and shipbuilding, benefit from higher exchange rates in the short term. In contrast, in the long term, rising exchange rates may lead to higher raw material costs, posing challenges.