South Korean won touches seven-month high on report of currency talks with US
The currency rallied after newspaper Korea Economic Daily cited an unnamed government official as saying the US believes a relatively weak won is a fundamental cause of the Asian nation's trade surplus. The talks are ongoing and nothing has been decided yet, Korea's finance ministry said in a statement.
The won advanced as much as almost 2 per cent to 1,368.50 per dollar on May 21, the strongest level since October 2024. The currency unwound some of those gains on May 22, weakening 0.6 per cent.
'The idea of currency accords was always mostly the cherry on top for what was already a compelling medium bullish case for Asia FX,' said Mr Richard Franulovich, head of foreign-exchange strategy at Westpac Banking in Sydney.
The won's volatility comes amid concern the US is using the threat of higher tariffs to convince its trading partners to allow their currencies to strengthen. US President Donald Trump and other officials in his administration have long argued weakness in Asian currencies is handing exporters in the countries an unfair advantage.
The won sunk to the weakest level in a decade in April as rising trade tensions following Mr Trump's 'liberation day' tariff threats sapped demand for emerging-market assets. While strengthening in recent weeks, the won is still one of the world's most undervalued currencies, based on its real effective exchange rate.
The yen briefly weakened earlier on May 22 after US Treasury Secretary Scott Bessent and Japanese Finance Minister Katsunobu Kato reaffirmed that markets should dictate currency levels.
Korea's currency has strengthened almost 7 per cent against the greenback this quarter, the best performer in Asia after the Taiwan dollar, according to data compiled by Bloomberg. The won closed 0.9 per cent higher on May 14 after a media report said officials from Korea and the US discussed currency policy at a meeting in Milan.
'I foresee challenges with putting exchange-rate clauses that target certain levels in any trade agreement, so would not necessarily think a trade-related catalyst is pending,' said Mr Brendan McKenna, a strategist at Wells Fargo in New York. Still, 'the won could certainly strengthen more if local officials agree to certain FX sticking points,' he said. BLOOMBERG
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