Korean Won Slumps to 15-Month Low Amid Global Rate Divergence

The South Korean won has plunged to 1,482.30 against the U.S. dollar, its weakest level since March 2023, as persistent monetary policy divergence between the Bank of Korea and the U.S. Federal Reserve intensifies market pressures. This depreciation brings the currency into its 14th consecutive day of decline, the longest streak since 2008, underscoring deepening investor skepticism about Korea’s economic resilience amid global tightening cycles. The depreciation has accelerated since early January, with the won losing over 3.8% in the past three weeks alone. This follows the Federal Reserve’s decision to maintain its benchmark rate at 5.25%–5.50%, while the Bank of Korea kept its policy rate unchanged at 3.50%, failing to close the 175-basis-point gap. As a result, capital outflows have intensified, with foreign investors selling a net $1.2 billion in Korean equities and government bonds in December 2025 and January 2026. The weakening won is particularly impactful for Korea’s export-driven economy, where multinational firms like Samsung Electronics and Hyundai Motor rely heavily on stable currency valuations. A weaker won boosts export competitiveness but raises import costs, fueling inflationary pressures. Core inflation rose to 3.9% in December 2025, the highest in 18 months, prompting concerns over the Bank of Korea’s ability to balance growth and price stability. Financial markets are responding with increased volatility. The KOSPI index has declined 2.3% over the past week, and the 10-year government bond yield has climbed to 3.42%, up from 2.98% in late 2024. The Bank of Korea has signaled potential policy adjustments in its upcoming February meeting, but analysts remain cautious, citing external constraints and domestic demand weakness.