Won Breaches 1,560, Hitting Post-Crisis Low; Authorities Launch Emergency Response

The South Korean won plummeted past 1,560 per dollar, its weakest level since the global financial crisis, prompting an emergency response from financial authorities and major banks.

This sharp depreciation was triggered by a surprisingly strong U.S. jobs report that boosted the dollar, compounded by the yen's weakness and significant stock selling by foreign investors in Korea.

The future direction of the exchange rate will likely depend on upcoming U.S. inflation data, the Federal Reserve's policy meeting (FOMC), and the Bank of Korea's subsequent actions.

The USD/KRW exchange rate recently surged, crossing the 1,560 won threshold and marking its highest level since the 2008 global financial crisis.

The primary catalyst for this sudden move was the release of a surprisingly strong U.S. jobs report on June 5. The report, showing 172,000 new jobs against a consensus of 85,000, immediately sent U.S. interest rates and the dollar soaring. This created a powerful external shockwave, strengthening the dollar against nearly all other currencies, including the Korean won.

This global dollar strength was compounded by several key factors. First, the Japanese yen was already weak and re-testing the symbolic 160 level against the dollar. This created a regional downward pull on Asian currencies, as markets often trade them as a bloc. Second, this external pressure was amplified by domestic capital flows. Foreign investors began selling off their holdings in the Korean stock market, a move that requires them to sell won and buy dollars to repatriate their funds, directly fueling the won's decline. The combined force of a strong dollar, a weak yen, and foreign equity outflows created a perfect storm for the won.

In response, Korean financial authorities and the Bank of Korea (BOK) took immediate action. They held an emergency meeting, issuing a strong verbal warning that they would not tolerate 'excessive volatility'. This was backed by market stabilization measures, where authorities sell U.S. dollars from their foreign exchange reserves to slow the won's fall. This intervention is indirectly confirmed by the slight decrease in Korea's foreign reserves in May. Major financial institutions also activated their 'contingency plans' to manage risks associated with the rapid currency fluctuations.

Looking back, this event didn't happen in a vacuum. The won had already been under pressure for months. While the BOK had signaled a 'hawkish' stance, indicating a willingness to raise interest rates, this was not enough to counteract the powerful short-term market dynamics. Even positive developments, such as steady bond inflows from Korea's inclusion in the WGBI, were overshadowed by the larger and more immediate stock outflows. The situation highlights that while long-term fundamentals like a strong current account surplus are important, they can be temporarily overwhelmed by global macroeconomic shifts and short-term capital movements.

FOMC (Federal Open Market Committee): The monetary policymaking body of the U.S. Federal Reserve, which meets eight times a year to set key interest rates.
Foreign Exchange Reserves: Assets held by a central bank in foreign currencies, used to back liabilities and influence the domestic exchange rate.
WGBI (World Government Bond Index): A broad index of global government bonds from multiple countries. Inclusion typically attracts significant foreign investment into a country's bond market.

Won Breaches 1,560, Hitting Post-Crisis Low; Authorities Launch Emergency Response

The South Korean won plummeted past 1,560 per dollar, its weakest level since the global financial crisis, prompting an emergency response from financial authorities and major banks.

This sharp depreciation was triggered by a surprisingly strong U.S. jobs report that boosted the dollar, compounded by the yen's weakness and significant stock selling by foreign investors in Korea.

The future direction of the exchange rate will likely depend on upcoming U.S. inflation data, the Federal Reserve's policy meeting (FOMC), and the Bank of Korea's subsequent actions.

The USD/KRW exchange rate recently surged, crossing the 1,560 won threshold and marking its highest level since the 2008 global financial crisis.

FOMC (Federal Open Market Committee): The monetary policymaking body of the U.S. Federal Reserve, which meets eight times a year to set key interest rates.
Foreign Exchange Reserves: Assets held by a central bank in foreign currencies, used to back liabilities and influence the domestic exchange rate.
WGBI (World Government Bond Index): A broad index of global government bonds from multiple countries. Inclusion typically attracts significant foreign investment into a country's bond market.