The real-time index on the won-dollar exchange rate has long been a subject of keen interest in the financial world. In Seoul, at a dealing room of Hana Bank on December 6, this index is vividly displayed on an electronic board. Last week, the Korean currency faced a significant downturn, emerging as the worst performer globally. This was mainly due to the political turmoil that followed President Yoon Suk Yeol's short-lived declaration of martial law, which had a profound impact on market sentiment.

Impact of Political Developments on the Won

According to data compiled by Yonhap Infomax, the Korean won dropped by 24.5 won per dollar over the past week. This marked the sharpest weekly fall since the third week of January when the currency dropped 25.5 won. On Friday, the won was down 1.86 percent against the greenback compared to a week earlier, outperforming other major currencies. The Australian dollar lost 1.32 percent, and the Chinese yuan fell 0.36 percent against the U.S. dollar. Meanwhile, the Japanese yen and the British pound gained 0.1 percent and 0.26 percent, respectively. During offshore intraday trading on Wednesday, the won plunged to 1,442 won, the lowest since October 2022. Even after President Yoon declared emergency martial law in a surprise late-night televised address, the currency remained at the 1,400 won level. At 3:30 p.m. on Friday, the local currency was quoted at 1,419.20 won against the greenback, down 4.1 won from the previous session.Economist Moon Jeong-hee from KB Kookmin Bank pointed out that the political developments have further dented investor sentiment. This sentiment was already affected by concerns about the semiconductor industry cycle and the uncertainty stemming from Donald Trump's tariff policy. The political unease also led foreign investors to dump local shares. During the three sessions from Wednesday to Friday, overseas investors sold a net 1.09 trillion won ($765.45 million) worth of shares in the benchmark Korea Composite Stock Price Index (KOSPI) market.The won-dollar exchange rate is not just a number on a board; it reflects the complex interplay of political, economic, and market forces. As we continue to monitor these fluctuations, it becomes clear that understanding the underlying factors is crucial for making informed financial decisions.