The Korean won-to-dollar exchange rate, which once soared well above 1,400 won, has now fallen to the low 1,300 range.

Experts predict that this trend may continue, and by the end of the year, the exchange rate could fall below 1,300 won and enter the 1,200 range. The prolonged strength of the U.S. dollar is now giving way to a stronger Korean won.

On the 30th of last month, the won-dollar exchange rate dropped to the 1,300s, marking its lowest level since early January this year.

At the close of the Seoul foreign exchange market that day, the won-dollar exchange rate was recorded at 1,307.8 won, down 10.8 won from the previous trading day. This closing rate is the lowest since January 3rd (1,304.8 won), nearly nine months ago. The exchange rate opened at 1,310.9 won, 7.7 won lower than the previous day, and during the session, it briefly dipped to 1,303.4 won, hovering around the 1,300 mark.

This trend of a stronger won and weaker dollar, which has been prominent since June of this year, is driven by a complex set of factors, including influences from the economies of Korea, the U.S., and the global market.

On this particular day, the decline in the dollar was influenced by the election of Shigeru Ishiba, a supporter of the Bank of Japan's (BOJ) path toward normalizing interest rates, as well as China's announcement of a liquidity package, which strengthened both the yen and the yuan, and in turn, the won. Experts also point to the yuan's strength from China's large-scale stimulus measures, the slowing of U.S. inflation, and Korea's economic recovery as contributing factors. However, some analysts caution that the won's strength may be limited, as expectations for a rate cut by the Federal Reserve (Fed) and the upcoming U.S. presidential election in November could temporarily strengthen the dollar.

Experts believe that the won-dollar exchange rate could break below 1,300 by year-end. Recently, the Korean won has shown a stronger correlation with the yuan and yen. Asian currencies, including the won, yuan, and yen, are strengthening together after a long period of weakness.

Hagyeon Hah, a research fellow at Shinhan Investment Corp., commented, "Korea's high export volume to China and its role as an alternative investment market for foreigners have deepened the won's correlation with the yuan. Whether the won continues to strengthen will depend on China's economic recovery." Moon Da-eun, a researcher at Korea Investment & Securities, added, "If Japan confirms additional rate hikes, the yen will strengthen, which in turn will weaken the dollar and affect the won-dollar exchange rate."

The won-dollar exchange rate creates both economic challenges and opportunities for businesses and individuals alike.

For a long time, the strong dollar, often referred to as the "King Dollar," was beneficial for Korean Americans traveling to Korea, but now, with a weaker dollar, the exchange rate yields fewer won per dollar.

Many Korean American businesses, which buy Korean products with dollars and sell them in the U.S., are also negatively impacted by the weaker dollar, as they now have to pay higher prices for goods.

Conversely, Koreans traveling to the U.S. benefit from having to exchange fewer won for dollars. The Korean tourism industry is expecting an increase in Korean tourists visiting the U.S.

A stronger won is also welcome news for Korean expatriates and students living in the U.S. When the dollar was strong, expatriates earning in won faced reduced monthly income due to the weak won. Students experienced a similar challenge as their living expenses, sent in won, significantly decreased in dollar value. Korean parents who had to send money to the U.S. for their children also faced increased financial burdens due to the strong dollar, but this situation is now easing.

<Hwandong Cho>