For the last few months, the exchange rate of a dollar to a won has significantly increased, as one U.S. dollar is now worth 1,330 Korean won. It is a significant increase compared to the beginning of the year, where it was only worth 1,247 won in February. However, it is not the first time that this trend has taken place. South Korea experienced a greater increase in the dollar exchange rate during the second half of 2022.

Last September, the dollar exchange rate peaked at 1,430 won per dollar. It was the most remarkable rate since the financial crisis of 2008. Professionals analyze a few reasons for this increase. The first is the unstable global movement. The Ukraine-Russian war is a big part of the reason. People's demand for the dollar, the international standard currency unit, increased. The value of dollars soared above all other currencies. 

Another reason was the decision of the U.S. Federal Reserve to increase the critical rate increase. The U.S. Federal Reserve took a "giant step," or the increase of the key rate by 0.75%P. This act's purpose was to stop inflation in the economy. However, the decision caused a contraction in the global economy, putting people on edge. Again, demand for the dollar increased, and its value increased. These factors combined raised the dollar exchange rate to over 200 won in four months. 

This time, the prediction for the additional increase of the vital rate is expected, as U.S. Federal Reserve decided to take a "baby step," or 0.25p increase of the critical rate. Jerome Powell, Chair of the Federal Reserve of the United States, clarified that there would be no reduction in the critical rate, at least for this year. It increased the value of dollars again. Additionally, Korea's trade deficit is a massive factor in decreasing the value of the won. The trade fell by 11% compared to last year. Won is losing its value in the global market. 

The trend of surging dollar exchange rate is a problem for Korea, as it is going through stagnation in its economy, swelling people's nervousness. However, professionals estimate that this trend will continue as the value of dollars surge and the value of won plummet.

Resource:
기자 임해원. (2023, April 21). 달러 약세에도 계속된 원.달러 환율 상승, 이유는? 이코리아. Retrieved April 23, 2023, from https://www.ekoreanews.co.kr/news/articleView.html?idxno=66559 

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