The Persistent Weakness of the Korean Won

Despite the global trend of the U.S. dollar weakening since President Donald Trump's inauguration, the South Korean won has not seen a similar rebound. This anomaly is attributed to a combination of political uncertainties, sluggish domestic consumption, and the looming threat of U.S. tariffs. Unlike the Japanese yen and the euro, the won lacks significant factors that could prompt a recovery, suggesting that its depreciation against the dollar is likely to persist.

Impact of U.S. Tariff Threats

Experts highlight the vulnerability of South Korea's export-driven economy to U.S. tariff threats as a key factor behind the won's weakness. This exposure has led foreign investors to view South Korean assets negatively, further exacerbating the currency's decline. The situation is compounded by the country's inability to offset these impacts through domestic demand, unlike other nations targeted by U.S. tariffs.

Economic Downturn and Foreign Investment

Concerns over an economic downturn and the significant withdrawal of foreign investments from the South Korean stock market are also contributing to the won's depreciation. The Bank of Korea has warned of potential drops in GDP growth rates if domestic consumption continues to weaken and U.S. tariff wars escalate. Additionally, the trend of South Korean retail investors increasingly purchasing overseas stocks is adding pressure to the won's value.

Looking Ahead

While the U.S. economy's slowdown may continue to weaken the dollar, the dollar-won exchange rate is unlikely to see a significant decline soon. This is due to South Korea's designation as a high-tariff country by the Trump administration and ongoing political uncertainties, including the impeachment ruling of President Yoon Suk Yeol.