The Korean won weakened Tuesday, hit by the strengthening of the US dollar as Washington and Beijing deescalated their trade war. The benchmark Kospi remained flat, unable to join the global stock rally.
The won stood at 1,416 won per dollar as of the close of daytime trading Tuesday, down 13.6 won from the previous session. After opening at 1,415 won, it briefly strengthened to 1,408 won before slipping to 1,420.5 during the session.
On the previous day, the won had weakened to 1,426 per dollar during after-hours trading, as the dollar appreciated on news that the US and China had agreed to roll back tariffs on each other's goods for 90 days.
The dollar index, a key measure of the greenback’s strength, hovered around 101.5 on Tuesday, hitting a one-month high. It had dipped to 98.28 on April 21, when US-China trade tensions peaked.
Although the won had appreciated to 1,396 per dollar on May 8 — its strongest level in six months — it gave back some of those gains on Tuesday. At the time, traders had assumed the US might push to devalue the dollar to reduce its trade deficit, which had strengthened Asian currencies.
Analysts expect continued volatility in the foreign exchange market, despite the temporary tariff rollback.
"Concerns persist that the current level of tariffs could still be a blow to the economy, and the agreement is only a 90-day reprieve," said Wee Jae-hyun, an economist at NH Futures.
“The optimism around the US-China trade negotiations may encourage investors to shift back toward risk assets, limiting further weakness in the won,” said Min Kyung-won, an economist at Woori Bank. “The gain of the Chinese yuan — a proxy for the Korean won — will partially offset the impact of the dollar’s strength.”
While Wall Street and global markets rallied on hopes of easing trade tensions, Korea’s stock market remained largely subdued Tuesday.
The Kospi closed at 2,608.42, up just 1.09 points, or 0.04 percent. After surpassing the 2,600 mark for the first time in two months on Monday, buoyed by progress in trade negotiations, the index opened at 2,601.76 and rose to as high as 2,620.64 before retreating.
Foreign investors were the sole net buyers, purchasing 171.4 billion won ($120 million) in stocks. Retail and institutional investors sold off 136 billion won and 89.3 billion won, respectively.
Meanwhile, the tech-heavy Kosdaq rose to 731.88, up 6.48 points or 0.89 percent on the day.
silverstar@heraldcorp.com
