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Monitors at KEB Hana Bank’s dealing room in downtown Seoul display the KOSPI and won-dollar exchange rate on Sept. 5, when the exchange rate topped 1,371 won to the dollar. (Yonhap)

The won-to-dollar exchange rate surpassed 1,370 won, continuing to shoot up without an end in sight. The rise of the dollar’s value internationally, coupled with South Korea’s trade deficit and the weakening of the Chinese yuan, has led to the quick downfall of the won’s value.

The won-to-dollar exchange rate closed at 1,371.40 won on Monday at the Seoul foreign exchange market, having risen by 8.8 won from the previous day. The exchange rate started trading at 1,365.0 won that morning and exceeded 1,370 won before noon. The last time the won-to-dollar exchange rate surpassed 1,370 won was 13 years and five months ago, when it hit 1,392.0 won on April 1, 2009.

The KOSPI closed at 2,403.68 on the same day, having dropped by 0.24% (5.73 points) from the day prior.

The US Federal Reserve’s policy interest rate hikes have heightened the value of the dollar, considered a risk-free asset. The possibility of an economic slowdown in Europe is also pushing the dollar’s value upward.

On Friday, the state-owned Russian firm Gazprom announced that it would completely halt gas supplies to Europe through the Nord Stream 1 pipeline.

The strengthening of the dollar has led to major currencies dropping in value one after another. The US dollar index, which measures the dollar’s value relative to six major currencies including the euro, the yen and the pound, was tallied at 110.23 as of 2 pm on Monday. The dollar index in March 1973 was 100.

The last time the figure exceeded 110 was June 19, 2002 (110.19), a little over 20 years ago.

Concerns are being raised regarding whether the won’s value has been falling much more dramatically than that of other currencies. The won’s value relative to the dollar dropped by 2.35% between Aug. 26, when the Jackson Hole meeting took place, and Friday. The dollar index increased by 0.7% during the same time period, which means the value of six major currencies other than the dollar dropped by the same percentage. During the same time period, the euro’s value relative to the dollar fell by 0.13%, while the value of the yen and the yuan compared to the dollar dropped by 1.89% and 0.40%, respectively.

South Korea’s trade deficit and the weakening of the Chinese yuan are other factors contributing to the steep fall of the won. South Korea has been recording trade deficits month after month, which have been destabilizing the domestic dollar supply.

Plus, the yuan-to-dollar exchange rate hit 6.93 yuan on Sunday. The two currencies’ exchange rate has shot up dramatically since mid-April, exceeding the 6.9-yuan range since late last month. The weakening of the yuan can make Chinese products more competitive in terms of price and may threaten the competitiveness of exports from South Korea and other developing nations.

The won’s value has been dropping since June due to the strengthening of the dollar following the giant step taken by the Fed, and due to other factors such as South Korea’s faltering trade balance and the weakening of the yuan since mid-August.

“The downturn of the won seems to have entered a new phase starting on Aug. 16,” the Korea Center for International Finance stated.

During an emergency macroeconomic finance meeting, Choo Kyung-ho, South Korea’s deputy prime minister and minister of economy and finance, said, “Starting in August, factors like the worsening trade balance and the weakening of the yuan overlapped, leading to a swift increase in the won-to-dollar exchange rate.”

By Jun Seul-gi, staff reporter

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