<Korea News> KRW-USD Exchange Rate Surges as DeepSeek, Fed, and Trump Factors Take Effect.

The Korean won saw a sharp rise of over 20 KRW against the US dollar on January 31, reflecting major economic developments during the Lunar New Year holiday. These include China’s unveiling of the AI-powered “DeepSeek”, the Federal Reserve’s hawkish stance on interest rates, and Trump’s warning of renewed tariff measures.

At 3:30 PM in the Seoul Foreign Exchange Market, the KRW-USD exchange rate closed at 1,452.70 KRW per dollar, marking a 21.40 KRW jump from the previous trading day.

The day’s trading began at 1,446 KRW, already 14.70 KRW higher, before surpassing 1,450 KRW in the morning session. At one point, the rate surged to 1,456 KRW, hovered around 1,455 KRW, and slightly declined towards the market close.

This marks the first time in 11 days—since January 20 (1,451.70 KRW)—that the exchange rate has crossed the 1,450 KRW level.

For four consecutive trading days since January 21, the rate had remained stable in the 1,430 KRW range. However, following the Lunar New Year holiday, it spiked sharply.

The sudden appreciation of the dollar against the won is attributed to several external factors that materialized during the holiday period:

1. China’s “DeepSeek” Announcement:

   • China introduced DeepSeek, an advanced low-cost, high-performance AI model, causing increased risk aversion in the global market.

   • This led to a flight to safe-haven assets like the US dollar, exerting downward pressure on the Korean won.

2. Foreign Capital Outflows from the Korean Stock Market:

   • Foreign investors sold off Korean stocks, contributing to additional won depreciation.

3. Trump’s Renewed Tariff Threats:

   • Former US President Donald Trump reaffirmed on January 30 (local time) that he plans to impose a 25% tariff on Mexico and Canada starting February 1.

   • This announcement bolstered the dollar, further weakening the won.

4. Federal Reserve’s Interest Rate Decision:

   • The Federal Open Market Committee (FOMC) held its policy rate at 4.25–4.50% during its January 29 meeting.

   • The Fed’s hawkish stance dampened expectations for near-term rate cuts, contributing to continued dollar strength.

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