The U.S. dollar shot up above 1,410 won in early Seoul trading Friday for the first time in four months on stronger-than-expected U.S. growth data and renewed jitters over trade prospects after U.S. President Donald Trump stressed that South Korea's $350 billion investment commitment in the U.S. should be made "up front".
Fears about the hefty greenback price tag Korea may be forced to bear unsettled the markets. The KOSPI lost 2.1 percent and the secondary Kosdaq 1.7 percent as of 11:00 a.m. Friday. The dollar trades above 1,410, a level not seen since May 15.
The dollar index, which measures the greenback against six major currencies, rose 0.70% to 98.485, as expectations for another Fed rate cut faded. The Commerce Department reported a revised second-quarter GDP growth rate of 3.8%, up from a preliminary 3.3%, marking the highest growth since the third quarter of 2023.
The stalled trade deal with the U.S. weighed heavily over the Korean won. President Donald Trump reiterated that South Korea's investment in the U.S. under a trade agreement would be "up front," amid ongoing trade negotiations.
The $350 billion figure amounts to 84 percent of South Korea's foreign reserves as of August. South Korean officials, including President Lee Jae-myung, have discussed a currency swap with U.S. Treasury Secretary Scott Besant to mitigate market impact, but the U.S. remains reluctant.
"If Korea complies with the U.S., it could risk another financial crisis," said Moon Da-un, a researcher at Korea Investment & Securitie..
NH Futures economist Wi Jae-hyun added, "The strong dollar and investment uncertainty are increasing upward pressure on the exchange rate." At the same time, the won-yen cross rate was 941.71 won per 100 yen, up 0.70 won from the previous day, while the yen-dollar rate rose 0.68% to 149.840 yen.
Meanwhile, Seoul sought to bolster foreign confidence at the Korea Investment Summit, an IR on Korean economy sponsored by the government in New York. The foreign exchange market trading hours will be be extended to around the clock instead of closing at 2 a.m. that restrict U.S.-based investors. Seoul will also allow offshore won settlement institution enabling foreign institutions to open won-denominated accounts in Korea and directly manage won-based deals. Regulations will be eased to allow foreigners to freely trade, hold, and raise funds in the Korean won. Enhancing accessibility and freedom of FX trade is a prerequisite for Korea's bid to join the MSCI Developed Market status.
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