Won Weakens Sharply to Near 1,400 Amid Fed Tightening Concerns

The Korean won has weakened sharply in recent days, nearing its value of around 1,400 per US dollar. This decline comes after a brief advance into the 1,330s, which quickly unwound due to renewed concerns about US tightening and foreign stock selling.

According to analysts, the Fed's rate hike last week has lifted Treasury yields and the dollar, putting upward pressure on the exchange rate. Woori Bank FX economist Min Kyung-won noted that 'the exchange rate is expected to face upward pressure from dollar strength following the Fed's rate hike and risk-off sentiment.'

KB Kookmin Bank FX researcher Moon Jung-hee attributed the earlier rally to a softer dollar, reduced foreign stock selling, and relatively contained overseas investment outflows by Korean investors. However, with those favorable flows fading, the direction of the won will increasingly depend on whether foreign investors continue selling Korean stocks and how aggressively Korean investors buy overseas assets.

Moon sees the dollar-won rate trading around 1,380 within a broad range of roughly 1,340 to 1,420 over the next three months. He cautioned that treating a return to 1,400 as a sign of renewed instability would be premature, as the current range is more consistent with fundamentals than levels above 1,500 seen earlier this year.