Won-Dollar Rate Surges on Tariff Delays and Weak Yen, All Eyes on Fed and Korea-US Summit

Won-Dollar Rate Jumps to 1,440 During Trading on Oct. 23
Korea-US Tariff Talks and Weak Yen Drag Down Won’s Value
Markets Focus on October FOMC and Korea-US Summit

The won-dollar exchange rate broke through the key psychological threshold of 1,430 won per dollar, surging to the 1,440 range during trading. Prolonged delays in Korea–US tariff negotiations have heightened market uncertainty, while the yen’s continued weakness has further weighed on the won. Investors are now closely watching two key factors that could shape the currency’s direction — the US Federal Reserve’s potential rate cuts and the outcome of the upcoming Korea–US summit.

Stalled Tariff Talks Drive the Won’s Upswing

On October 23, the won-dollar exchange rate closed at 1,439.6 won in the Seoul foreign exchange market, up 9.8 won from the previous session. During intraday trading, it climbed as high as 1,441.5 won — the highest level since April 29. The won’s weakness stood out among Asian currencies that day, falling 0.62% against the dollar, while the Taiwan dollar and Singapore dollar slipped only 0.1%.

The sluggish progress in Korea–US tariff negotiations has been cited as the main factor behind the won’s continued decline. The two nations have been working since July to finalize a deal in which the US would lower tariffs on Korean exports in exchange for roughly 350 billion dollars in Korean investments in the United States. However, the agreement has yet to be formalized in writing, largely because Korea’s foreign reserves remain limited for such large-scale cash commitments. As of the end of last year, Korea’s nominal GDP stood at 1.87 trillion dollars, with foreign reserves at 415.6 billion dollars — just 22.2% of GDP, significantly lower than other major Asian economies.

In response, Seoul proposed an “unlimited currency swap” as a prerequisite for its investment pledge, but Washington reportedly demanded an unconditional investment guarantee, referencing its prior deal with Japan. The two sides remain at odds. On October 24, Industry Minister Kim Jeong-kwan told lawmakers during a parliamentary audit that the key sticking point in the latest round of follow-up negotiations was “how much direct investment would be appropriate.” When asked by opposition lawmaker Kim Seong-won about President Lee Jae-myung’s recent comment to CNN that the tariff deal could “take time to conclude,” Kim replied, “That seems to be the case — the president’s statement is accurate for now.”

Does a Weaker Yen Mean a Weaker Won?

The surging dollar-yen exchange rate has also weighed on the won. The yen, which briefly strengthened in mid-October, turned sharply weaker after Sanae Takaichi—often described as the “heir to Abenomics”—was elected as the new head of Japan’s ruling Liberal Democratic Party on October 21. Markets expect Japan to continue its policy of fiscal expansion and low interest rates. Takaichi is reportedly preparing an economic stimulus package even larger than last year’s to ease households’ inflation burden.

This renewed yen weakness is having a direct effect on the Korean currency. One market analyst explained, “The yen and the won tend to move closely together in foreign exchange markets, as investors generally view them as similar Asian currencies.” The analyst added, “Beyond the dollar index rising due to a weaker yen, the won’s value is also directly influenced by movements in the yen.”

Whether the yen’s slide continues will likely depend on the Bank of Japan’s upcoming policy decision on October 30. Most analysts believe it will be difficult for the BOJ to shift toward tightening, given Japan’s inflation dynamics. The central bank ended its negative interest rate policy last March for the first time in 17 years, but expectations remain that monetary easing will persist. Meanwhile, the appointment of Satsuki Katayama—known for her pro-strong-yen stance—as Japan’s next finance minister under Prime Minister Takaichi is adding some optimism that the yen’s decline could moderate.

What Will Shape the Exchange Rate Ahead

With persistent downward pressure on the won, market attention is turning to the US Federal Reserve’s next policy move. Korea currently faces a dilemma — high currency volatility and an overheated housing market make it difficult for the Bank of Korea to cut rates preemptively. Should the Fed lower its benchmark rate, however, the narrowed interest-rate gap between Korea and the US could lead to a relative appreciation of the won.

Most analysts expect the Fed to cut rates by 25 basis points (0.25 percentage points) at its upcoming Federal Open Market Committee (FOMC) meeting on October 28–29. According to a Reuters poll, 115 out of 117 surveyed economists — or roughly 98% — forecast that the Fed will trim rates to a range of 3.75–4.00%. The shift reflects a growing emphasis among Fed officials, including Chair Jerome Powell, on addressing labor market weakness rather than inflation risks.

Markets are also closely watching the upcoming summit between US President Donald Trump and South Korean President Lee Jae-myung. On October 24, National Security Adviser Wi Sung-lak announced that President Lee would meet Trump on October 29 during the APEC summit in Gyeongju, followed by talks with Chinese President Xi Jinping on November 1. Following the announcement, the won-dollar exchange rate edged down 3.0 won to 1,436.6 won as of 9:20 a.m. While the outcome of the summit remains uncertain, confirmation of the meeting schedule itself has helped ease some of the market’s earlier concerns.