Recently, the South Korean won has been on an upward trajectory, bolstered by a notable surge in the Taiwanese dollar. This surge was triggered by speculations surrounding potential trade negotiations between Taiwan and the US. The Taiwanese currency’s impressive 5 percent spike on Monday, the most significant since 1988, has had a ripple effect on other Asian currencies, including the won.
Amidst this currency movement, the Korean won showcased strength against the US dollar in offshore trading. The one-month non-deliverable forward contract was quoted at 1,372.9 won on the New York forex market, indicating a positive outlook for the won’s value. If this trend persists, the Korean won is anticipated to open within the 1,370 won range against the US dollar in daytime trading.
Notably, the Korean won exhibited a more pronounced gain against the greenback, closing after-hours trading at 1,401.5 won per dollar. This marked a significant increase of 19.5 won from the previous trading session. Throughout trading hours, the won consistently traded in the upper 1,390 won range, breaching below the 1,400 won mark for the first time in five months.
While the Taiwanese central bank refuted claims that the US requested a deliberate increase in the value of the Taiwan dollar, the forex market continues to experience fluctuations. Following a weaker point of 1,487.6 won to the dollar on April 9, the won has been regaining strength amidst speculations of a potential softening of US tariff policies through trade negotiations with partner nations.
However, the forex market remains volatile, as evidenced by a substantial fluctuation of 34.7 won per dollar during daytime trading on the last trading day before a holiday weekend. This marked the largest fluctuation since November 11, 2022, highlighting the unpredictability in currency exchange rates.
The Bank of Korea reported that the average daily fluctuation in the won-dollar rate for April stood at 9.7 won or 0.9 percent, the highest volatility recorded since November 2022. BOK Governor Rhee Chang-yong acknowledged the positive trend of the won-dollar rate moving towards the 1,300-won range amidst the strengthening of Asian currencies. However, he cautioned about the prevailing high volatility, emphasizing the uncertainty surrounding the future stability of the won-dollar exchange rate.
As global economic dynamics continue to evolve, the interplay between currencies, trade negotiations, and market speculations will likely shape the trajectory of Asian currencies, including the South Korean won. The recent surge in the Taiwanese dollar serves as a testament to the interconnected nature of the global economy and the impact of geopolitical developments on financial markets.