Seoul: The local currency posted its weakest annual average against the U.S. dollar ever this year, data showed Wednesday, amid political turmoil and increased overseas stock investments by local investors. The won averaged 1,422.16 won against the greenback in onshore trading in 2025, the lowest level on record, according to market data.
According to Yonhap News Agency, the previous record yearly low of 1,398.39 won was set in 1998, during the Asian financial crisis. On Tuesday, the last trading day of the year, the won was quoted at 1,439 per dollar, marking a decline of 9.2 won from the previous session. Compared to a year earlier, when the country faced political instability due to former President Yoon Suk Yeol's martial law declaration, the won has increased by 33.5 won.
The won reached its lowest point of the year at 1,484.1 per dollar on April 9, while the strongest level was 1,350 on June 30. The quarterly averages were 1,452.66 won in the first quarter, 1,404.04 won in the second, and 1,385.25 won in the third, before falling to 1,450.98 won in the fourth quarter.
The significant depreciation of the won this year was influenced by political upheaval following the imposition of martial law and the impeachment of Yoon. Other factors included the persistent interest rate gap between South Korea and the United States and increased dollar demand from retail investors investing in overseas stocks. South Korea elected Lee Jae Myung as its new president in June.
In response to the currency volatility, foreign exchange authorities implemented various measures to stabilize the currency. These included temporary capital gains tax exemptions for investors selling overseas stocks to buy domestic shares and easing supervisory rules on banks' foreign currency liquidity stress tests to reduce excessive dollar hoarding.
The National Pension Service engaged in strategic currency hedging, while authorities issued strong verbal interventions in the market. "We will strengthen market monitoring and actively implement market stabilization measures to address excessive herd behavior," the Bank of Korea (BOK) stated in its monetary and credit policy operating guidelines for next year issued last week.
The BOK also announced plans to tackle structural imbalances in foreign exchange supply and demand and to pursue institutional improvements to enhance foreign investor accessibility. This includes introducing 24-hour trading in the FX market and making regulatory reforms related to the offshore use of the Korean won in transactions among nonresidents.
Furthermore, the central bank committed to extending currency swap arrangements and engaging in discussions with partner countries to bolster the nation's capacity to absorb external shocks and strengthen regional financial safety nets. The Seoul foreign exchange market is closed on Wednesday and Thursday and will reopen at 10 a.m. on Friday, one hour later than usual.