Won-Dollar Exchange Rate
The won-dollar exchange rate closed at 1,139.9 won per U.S. dollar on November 1, 4.6 won lower than the previous closing price. For reference, the rate had been 1,101.3 won per U.S. dollar at the end of September.
These days, the South Korean currency is depreciating at a particularly rapid pace. Specifically, the won-dollar exchange rate rose 3.31% in October alone, when the depreciation stood at 3.04%, 1.99%, 0.92% and 0.01% for the respective currencies of Turkey, Singapore, Taiwan and Hong Kong. Last month, the South Korean currency was second only to the British Pound (5.14%) in terms of the rate of depreciation. The Korean Won is showing significant fluctuations as well. Its average daily fluctuation for the first 10 months of this year is 7.6 won per U.S. dollar whereas the amount was 6.58 won in 2015 and 4.89 won in 2014.
External factors are likely to compound these conditions with time, too. For instance, the Fed is likely to raise rates in December and Brexit effects are taking shapes. This means the Korean Won is becoming more and more attractive for speculators. “Political instability is one of the favorites of speculators and eight out of the nine countries that went through a currency crisis in the 1990s were attacked by them in their presidential election years,” the Korea Capital Market Institute explained, adding, “South Korea would be well advised to refer to the cases of Argentina and Poland in the year of 1996, which succeeded in driving out speculators based on political stability.”
In the meantime, the South Korean government is still negative about the possibility of such an attack. “South Korea is currently posting a large amount of trade surplus along with an economic growth rate of approximately 3% and it is equipped with various safety measures in the forex market as well,” it mentioned, adding, “Speculative foreign exchange transactions, which are short sale transactions, cannot be made in the South Korean forex market, and the futures trading in the NDF market is not short sale strictly speaking.”