-On May 2, 2025, the KRW/USD exchange rate fell to 1,391.5, the lowest level since late 2024.
-The daily fluctuation was 48.5 KRW, marking the largest single-day move since March 2020.
-The drop was driven by renewed hopes for U.S.-China trade negotiations and increased dollar selling sentiment.
-The Taiwan dollar also appreciated, hitting its strongest level since January 2024.
Opinion
The resumption of U.S.-China trade talks has led to renewed optimism in the foreign exchange market, triggering a Korean won rally. In addition, traders began liquidating long USD positions ahead of a domestic holiday, further accelerating the downward move in the exchange rate. Although volatility may persist, analysts suggest that a sustained easing of trade tensions could stabilize the exchange rate in the 1,300 KRW range.
Core Sell Point
Optimism over U.S.-China dialogue may lead to currency stabilization, potentially reducing forex-related profit expectations for Korean exporters.
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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