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It is often said in financial circles that "only God knows the exchange rate." This adage was proven true once again at South Korea’s most prestigious academic institution. Even the "collective intelligence" of Seoul National University (SNU) economics students failed to predict the recent, unprecedented surge of the USD/KRW exchange rate.
The "Crystal Ball" Experiment
At the beginning of the fall semester in September, Professor Park Woong-yong, a member of the Bank of Korea’s Economic Research Institute advisory panel, challenged 61 students in his "International Finance" course. The task was simple but daunting: predict the closing exchange rate of the semester for extra credit.
The participants, including the professor and three teaching assistants, submitted their forecasts. The average prediction sat at 1,402.6 KRW. The majority of the class (and the professor himself, who predicted 1,375 KRW) anticipated the rate would hover between 1,375 and 1,415 KRW, assuming a period of relative stability following the 1,380 KRW levels seen in early September.
A Market That Defied Logic
The reality of the market proved far more volatile than the textbooks suggested. Shortly after the students submitted their guesses, the won began a steep depreciation. By late September, the rate breached the 1,400 KRW mark. Following the Chuseok holiday in October, the climb accelerated, shattering psychological resistance levels to reach the mid-to-high 1,400s.
According to market analysts, several unforeseen "macro headwinds" fueled this surge:
Outbound Investment Pressure: South Korea’s massive $350 billion investment commitment to the U.S. created a heavy demand for dollars.
Capital Flight: A surge in domestic retail investors buying U.S. tech stocks (the so-called "Seohak Ants") led to a significant supply-demand imbalance in the foreign exchange market.
Geopolitical and Monetary Divergence: Ongoing geopolitical tensions and the narrowing interest rate differential between the U.S. Federal Reserve and the Bank of Korea put further downward pressure on the won.
The Limits of Economic Modeling
The experiment concluded on December 11 with the final exam. Only a handful of students came close to the actual figure, with the top prize going to a student who predicted 1,457.2 KRW—a figure that seemed "pessimistic" in September but proved to be the most realistic.
"Exchange rates are influenced by an incredible array of variables, from political rhetoric to global supply chains," noted an industry analyst. "This result highlights that even for those trained in macroeconomics, the market remains a beast that is difficult to tame with models alone."
For the students of SNU, the failed forecast served as a valuable, if humbling, lesson: in the world of international finance, the only certainty is uncertainty.
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