Seoul, South Korea – The South Korean won has plummeted to a 15-year low, with the dollar-won exchange rate surpassing 1,485 won on Tuesday amid growing political uncertainty. The benchmark Kospi index also plunged below the 2,400-point mark.
As of 11:19 a.m. local time, the won traded at 1,485 won against the dollar, marking a 20.2-won increase from the previous day. This is the lowest level for the won since March 16, 2009. The Kospi index, meanwhile, shed 38.67 points, or 1.59%, to 2,391 points, falling below the 2,400-point mark for the fourth time in five trading days. The Kosdaq index also declined 9.87 points, or 1.46%, to 665.77.
The sharp depreciation of the won and the decline in the stock market were triggered by heightened political uncertainty following a series of statements from key government officials. Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok called for the impeachment motion against acting President Han Duck-soo to be reconsidered, while Democratic Party leader Lee Jae-myung responded by reaffirming his party's commitment to impeaching Han.
Analysts attributed the market volatility to concerns about prolonged political instability. Moreover, the Kospi's decline was exacerbated by the ex-dividend day, when stocks trade without the value of the upcoming dividend. Foreign investors have been net sellers of Korean stocks, offloading approximately 1800 billion won since the political statements were made.
"While the dollar index is hovering near its all-time high at around 108 points, it's not the sole driver of the won's weakness," said Lee Jae-won, a researcher at Shinhan Investment Corp. "The primary cause is the political risk."
Min Kyung-won, an economist at Woori Bank, added, "The foreign exchange market has reacted sharply to the heightened political uncertainty and Korea's weak fundamentals. With the Bank of Japan's governor avoiding mentioning a rate hike in January, the yen's weakness is making it difficult for the won to appreciate."
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