Record High Exchange Rate

As the geopolitical risk increases due to the North Korea’s test launching of a missile, the exchange rate of won to dollar and won to yen recorded the highest with a sudden raise in the past five months and 16 months, respectively.

The authority in charge of the foreign currency rolled its sleeves to deal with the situation by suggesting the active intervening policies. On the foreign currency market on the 10th, the exchange rate of won to dollar ranked the highest, recording 1238.50 won per dollar, an increase of 19.80 won (decrease in the value of won) compared to last weekend, thus the highest after the 1243.50 won per dollar of October 22nd, 2002. This day’s range of increase on the exchange rate of won to dollar was the highest in 23 months after 21.50 won recorded on April 4th 2001.

The exchange rate of won to yen also increased to 100 yen per 1060.62 won which is an increase of 20.34 won compare to last weekend, thus is the highest after 1063.53 won of November 13th, 2001. The range of increase also was the highest after 21.86 won recorded on August 16th, 2001.

The Ministry of Finance and Economics and the Bank of Korea suggested the intervention on the foreign exchange market by stating, “This kind of rapid change in the exchange rate is not advisable and we have our eyes closely on the dealings of futures outside of the market as well as the trend of the foreign currency market.”

The exchange rate of won to dollar started off with 1225 won per one dollar but the increased slowed down to 1222 won but with the news of North Korea’s test launching of a missile, it showed an increase of a large raise due to the purchase price of dollar outside of the market.

The Bank of Korea explained that the exchange rate of won to dollar shows a high rise because of the heightened North Korea’s nuclear crisis overlapping with the worsening of the current accounts and the selling session of the foreigners’ stock shares.

Kwu-Jin Lim mhjh22@donga.com