South Korea’s foreign exchange authorities are sending a clear message to currency speculators: the math isn’t mathing. The Korean won has been sliding against the US dollar in ways that officials say have nothing to do with the country’s actual economic health, and they’re not happy about it.
The won recently traded above 1,540 per USD, with intraday peaks hitting 1,555. Those are levels the currency hasn’t touched since the global financial crisis. For context, South Korea is the world’s 13th-largest economy, home to Samsung and Hyundai, and running what officials describe as stable economic indicators.
What’s actually happening with the won
South Korean officials are making a specific claim: the magnitude of the won’s depreciation is disproportionate to the country’s economic fundamentals. Second Vice Finance Minister Huh Chang raised this concern on May 20, calling the volatility excessive when measured against the underlying data.
Back in January, Bank of Korea Governor Rhee Chang-yong flagged that dollar-won levels in the high-1,400 range were misaligned with fundamentals. The won has only gotten weaker since then, which means the gap between what the currency “should” be doing and what it’s actually doing has widened considerably.
