Exchange Rate Calculator

The exchange rate between the South Korean won (KRW) and the U.S. dollar (USD) has experienced notable fluctuations over the past few months, influenced by various economic indicators and policy decisions. This report provides an analysis of the recent trends, underlying factors, and future projections for the KRW/USD exchange rate.

Recent Trends in the KRW/USD Exchange Rate

In the latter part of 2024 and early 2025, the KRW depreciated against the USD. In December 2024, the average exchange rate was 1,434.42 KRW per USD, up from 1,393.38 KRW in November 2024. By January 2025, the exchange rate had risen to 1,444 KRW per USD. This trend continued into early 2025, with the KRW/USD rate reaching 1,459.25 on March 20, 2025.

Factors Influencing the Exchange Rate

Several key factors have contributed to the depreciation of the KRW against the USD:

1. Interest Rate Differentials: The widening gap between U.S. and South Korean interest rates has led investors to favor USD-denominated assets, resulting in capital outflows from South Korea and placing downward pressure on the KRW.

2. Economic Performance: South Korea's economic growth has been sluggish. Preliminary estimates indicated a mere 0.1% GDP growth in Q4 2024, missing the forecasted 0.2%. The annual growth rate for 2024 was 2%, slightly below the 2.1% estimate.

3. Global Investor Sentiment: The KRW is sensitive to global risk perceptions. Increased volatility in global markets has led investors to seek safer assets, such as the USD, contributing to the KRW's depreciation.

4. Monetary Policy Decisions: The U.S. Federal Reserve's indication of a slower pace of interest rate cuts has strengthened the USD. In contrast, the Bank of Korea's decision to hold its key rate at 3% in December 2024 aimed to stabilize the weakening KRW but had limited immediate impact.

Technical Analysis

As of March 27, 2025, technical indicators suggested a strong buy signal for the KRW/USD pair. The Relative Strength Index (RSI) stood at 75.247, indicating overbought conditions. Moving averages across various periods also pointed towards a buying trend.

Future Projections

Forecasts for the KRW/USD exchange rate suggest a gradual appreciation of the KRW over the next two years. Projections indicate an average rate of 1,422.50 KRW per USD in May 2025, with a slight decrease to 1,421.94 KRW in July 2025. By December 2026, the rate is expected to be around 1,442.50 KRW per USD.

Conclusion

The KRW/USD exchange rate has been influenced by a combination of interest rate differentials, economic performance, global investor sentiment, and monetary policy decisions. While recent trends have shown a depreciation of the KRW against the USD, future projections suggest a potential stabilization and gradual appreciation of the KRW. Investors and policymakers should closely monitor these factors to make informed decisions in the evolving economic landscape.