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The Korean won surged sharply against the dollar, falling back into the 1,300 KRW range for the first time in five months. In after-hours trading on May 2, the USD/KRW rate dipped as low as 1,391.5, with a single-day move of 48.5 KRW—the largest since March 2020. The previous close was 1,401.0 KRW, meaning the won strengthened by 19.5 KRW in one day, touching the 1,300 range for the first time since December 2024.

The primary driver of the move was growing optimism over renewed U.S.-China trade talks. Both the U.S. State Department and China’s Ministry of Commerce have signaled willingness to re-engage, and markets responded swiftly. As the Chinese yuan appreciated, so did the Korean won and the Taiwan dollar, the latter of which reached its strongest level since January 2024.

Adding to the momentum was position unwinding ahead of Korea’s upcoming holidays. Many traders closed long-dollar positions, leading to further downward pressure on the USD/KRW rate. Market participants note that the combination of a weaker dollar, stronger Asian currencies, and position unwinding has driven the short-term decline in the exchange rate.

Looking forward, analysts expect some continued volatility, but if U.S.-China trade tensions continue to ease, the won may stabilize within the 1,300 KRW range, potentially changing the outlook for Korean exporters reliant on favorable FX conditions.

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