Won-dollar rate back on roller coaster as 1,400-won mark looms

The Korean won has recently experienced renewed pressure, causing a reversal of its recent gains against the U.S. dollar. This downward trend is attributed to several factors, including tighter U.S. monetary policy, higher oil prices, and a reduced dollar supply in the local foreign exchange market, according to analysts interviewed on Tuesday.

The exchange rate experienced a significant increase over the past week, rising by nearly 50 won over seven consecutive trading sessions. Starting from its level on September 9, the won-dollar rate climbed up to the critical 1,400-won mark. This development has brought the exchange rate back into focus, as it has fluctuated sharply in recent weeks.

On August 18, the exchange rate stood at 1,411.8 won per dollar. However, it plummeted to a 23-month low of 1,336.1 won on September 9, following a surge in dollar selling by major semiconductor exporters, which increased the foreign currency supply in the market. The trend quickly reversed itself, with the rate experiencing a seven-day upward streak, rising by 47.2 won from its September 9 close.

While the won showed some improvement on Tuesday, the rate retreated to close onshore trading at 1,358.2 won per dollar. The U.S. Federal Reserve's decision to raise its benchmark interest rate by 25 basis points has been a key driving force behind the recent rise in the exchange rate.