South Korea’s won steadied at 1,428 per dollar on Tuesday following a turbulent week that saw the currency hit a two-year low of 1,442. However, the Bank of Korea’s governor is doubtful the currency will reach past levels where it surpassed the US dollar in international trades.
In a recent meeting with lawmakers, cited by Yonhap News, South Korea’s central bank Governor, Rhee Chang-Yong, said the market remains in a “wait-and-see” mode.
The news comes amid fears of political instability, which has seen the country’s government ban several officials from traveling out of the country, including embattled President Yoon Suk Yeol.
In the early trading hours of December 10, the USD/KRW exchange rate was reported at 1,430.53, marginally up from 1,430.30 in the prior trading session. Trading Economics forecasts suggest the won may fluctuate around 1,423.07 by the end of the current quarter but could strengthen to 1,438.53 within the next year.
Won struggles amid geopolitical tensions
South Korea’s declaration of martial law last Tuesday sent shockwaves through financial markets, with the crypto sector and its local currency experiencing a sharp downturn.
According to crypto market research platform Kaiko, the BTC-KRW pair on South Korea’s leading exchanges, UpBit and Bithumb, experienced a dramatic drop. UpBit bore the brunt of the sell-off, with Bitcoin prices plunging 30% to 89 million Korean won, equivalent to approximately $63,000.
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The South Korean won dropped to a two-year low of 1,443.40 per USD when President Yoon announced martial law. Analysts from MarketWatch say the price levels have dropped further as the US currency strengthens.
In mid-2024, KRW had surpassed the US dollar to become the most traded currency globally. According to Kaiko, South Korea’s won surpassed the US dollar as the most traded currency against crypto in the first quarter of 2024.
KRW accounted for $456 billion in cumulative trade volume on centralized crypto exchanges during this period, edging out the USD, which recorded $455 billion. At the end of April, KRW was trading at 1,465.00 per dollar.
Analysts are attributing KRW’s struggles to lingering political instability and a cautious outlook among global investors. However, with China’s recent announcement of a “moderately loose” monetary policy for 2024, there’s growing optimism that the currency won’t drop further, given China’s role as South Korea’s largest trading partner.
South Korean crypto market metrics
South Korean crypto exchanges are showing signs of stabilization following the flash crash triggered by political turmoil last week. This is despite the initial market panic sparked by President Yoon’s martial law announcement.
Bitcoin (BTC) on local exchanges, particularly UpBit, has bounced back from a sharp 30% drop during the height of the crisis when BTC briefly plunged to 89 million Korean won. As of the time of writing, BTC has stabilized near the 1,390,000 KRW range, while XRP is changing hands around the 3,000 KRW level, per Coinmarketcap data.
Source: CoinMarketCap
KRW has demonstrated significant volatility against Bitcoin over the past six months. Bitcoin’s KRW trading value is nearing a six-month high, up approximately 12% from its lowest point earlier this year.
Year-to-date, Bitcoin has seen a positive shift against the won, with a price increase of roughly 10% compared to the crypto’s 123%.
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