A Historically Low Exchange Rate: 1001 Won per Dollar

The won-dollar exchange rate has dropped to its all-time low in seven years and three months. The rate barely maintained the 1,000 won mark as the government intervened the market.

On March 9, the exchange rate closed at 1,001.0 won per dollar, a 3.3 won decrease from the previous day at the Seoul Foreign Exchange Market. The rate is at its all-time low since November 14, 1997 (986.3 won). The won-dollar exchange rate started trading at 1,004, a 0.3 won drop from the previous day, and fell to 1,001.1 won at noon.

The rate jumped to the 1,003 mark for a while after the Bank of Korea announced “it would involve in the market if necessary,” but closed at 1,001 won as many dollar holders sold their positions.

The weak dollar phenomenon seems to come from three reasons: first, people do not expect early resolution of U.S. trade deficit; second, the yen-dollar rate dropped to the 104-yen mark; and third, China reportedly will adopt a new currency basket system.

Seung-Jin Kim sarafina@donga.com