The Korean won posted its weakest annual average against the US dollar ever in 2025, amid political turmoil and increased overseas stock investments by local investors. Data showed an average of 1,422.16 won per dollar, the lowest on record since the 1998 Asian financial crisis. Authorities responded with various measures to stabilize the currency.
The Korean won posted its weakest annual average against the US dollar ever in 2025, data showed on December 31, amid political turmoil and increased overseas stock investments by local investors. The currency averaged 1,422.16 won per dollar in onshore trading, the lowest level on record, surpassing the previous low of 1,398.39 won set in 1998 during the Asian financial crisis.
On Tuesday, the final trading session of the year, the won closed at 1,439 per dollar, down 9.2 won from the previous session. Compared to a year earlier, when the country was reeling from political turmoil sparked by then-President Yoon Suk Yeol's declaration of martial law, the won has risen by 33.5 won. The yearly low was 1,484.1 won on April 9, while its strongest level was 1,350 won on June 30.
Quarterly averages stood at 1,452.66 won in the first quarter, 1,404.04 won in the second, 1,385.25 won in the third, and slipped back to 1,450.98 won in the fourth. The won's sharp weakness was driven by political turmoil following the martial law imposition and impeachment of Yoon, the persistent interest rate gap between Korea and the United States, and increased dollar demand from retail investors' overseas stock investments. South Korea elected Lee Jae Myung as its new president in June.
In response to the currency volatility, foreign exchange authorities mobilized measures including temporary capital gains tax exemptions for investors selling overseas stocks to buy domestic shares. The government eased supervisory rules on banks' foreign currency liquidity stress tests to discourage excessive dollar hoarding. The National Pension Service carried out strategic currency hedging, while authorities made unusually strong verbal interventions.
"We will strengthen market monitoring and actively implement market stabilization measures to address excessive herd behavior," the Bank of Korea said in its monetary and credit policy operating guidelines for next year. The central bank pledged to address structural imbalances in foreign exchange supply and demand, pursue institutional improvements like introducing 24-hour FX trading and regulatory reforms for offshore won use, extend currency swap arrangements, and discuss with partners to bolster shock absorption capacity.
The Seoul foreign exchange market is closed on Wednesday and Thursday and will reopen at 10 a.m. on Friday. This event highlights the impact of domestic political instability and global investment trends on Korea's economy.
