By Aubrey Kim, New York Correspondent
(출처: LSE)
As of late May 2025, the global foreign exchange market is navigating a complex landscape shaped by a modest rebound in the U.S. dollar index, simultaneous strengthening of the Korean won and Japanese yen, and heightened uncertainty driven by shifting interest rate differentials and evolving trade policies. This article provides a comprehensive look at recent exchange rate movements, their underlying causes, key developments in global financial markets, and the outlook ahead.
Dollar Index Rebounds Slightly to 99.858, Still Below 100
On May 23, the U.S. dollar index (DXY) — which measures the dollar against six major currencies (euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc) — stood at 99.858, up 0.34% from the previous day. Despite this uptick, it remains below the 100 mark, reflecting market sentiment around easing global uncertainties, the cooling of U.S.-China trade tensions, and expectations of a Fed rate cut following weaker U.S. economic indicators.
The index had dipped to 97.92 in late April but recovered slightly in May amid changes in U.S. trade policies, improving economic data, and a modest reduction in financial market volatility. Nonetheless, concerns over U.S. fiscal health, expected rate cuts, and slowing global growth continue to weigh on the dollar’s strength.
Korean Won Strengthens Against Yen: 100 JPY = 960.55 KRW
As of the same date, the KRW/JPY exchange rate stood at 960.55 won per 100 yen, down 3.94 won from the previous day. This reflects the yen’s weakening, driven by Japan’s persistently low interest rates, the Bank of Japan’s dovish stance, and a surge in yen carry trades — where investors borrow yen to invest in higher-yielding currencies like the U.S. dollar.
In May 2025, the BOJ kept its policy rate unchanged at 0.5%, reinforcing its ultra-loose monetary stance. This divergence from U.S. interest rates continued to fuel yen selling. The resulting depreciation has impacted real economies, boosting Japanese export competitiveness and increasing Korean outbound tourism to Japan.
KRW/USD Volatile Around 1,380: Asian Currencies Rise Amid Fed Rate Cut Bets
The Korean won has fluctuated in the low 1,380s against the U.S. dollar, after peaking at 1,487 in early April. Weaker U.S. employment data, expectations of rate cuts, and progress in U.S.-China trade talks helped bring the rate down to a more stable range of 1,370–1,390 throughout May.
On May 2, disappointing U.S. jobs data sparked fresh rate cut speculation, prompting the KRW/USD rate to fall rapidly from 1,405 to the 1,390 range. Since mid-May, the dollar’s modest rebound has stabilized the rate near 1,380. The broader strengthening of Asian currencies — including the won, yuan, and yen — also supports the won’s short-term resilience.
Key Global Market Drivers: Interest Rates, Trade Policy, Credit Ratings
1. U.S. Rate Cycle and Dollar Movements
The Fed ended its rate hikes in 2024 and entered a cutting phase by year-end. In 2025, it has maintained a holding pattern, but softening inflation and weak economic indicators have revived market expectations for further cuts. Lower rates would weaken the dollar and increase capital inflows to emerging markets.
2. Trade Policy Dynamics in the U.S., China, and Japan
Policy shifts under the Trump administration, including evolving U.S.-Japan and U.S.-China negotiations, have increased currency volatility. Speculation that the U.S. may pressure Japan to strengthen the yen has recently supported Asian currencies, including the Korean won.
3. Sovereign Credit Outlook and Investment Sentiment
Recent downgrades or negative outlooks on sovereign credit ratings in major economies like the U.S. and South Korea have heightened investor caution. This has driven a mixed reaction, with flows into both safe-haven assets (dollar, yen, gold) and high-risk assets (emerging market currencies, equities, bonds).
Yen Weakness: Structural Causes and Implications for Korea
The persistent weakness of the Japanese yen is rooted in several structural factors. Chief among them is the significant interest rate gap between the United States and Japan, currently exceeding 4%. This disparity incentivizes investors to engage in carry trades—borrowing yen at low interest rates to invest in higher-yielding assets, particularly in dollars—resulting in ongoing yen depreciation.
Another major contributor is the Bank of Japan’s (BOJ) ultra-loose monetary policy. With continued quantitative easing and a firm commitment to low interest rates, the BOJ is effectively curbing demand for the yen in global currency markets. In addition, Japan’s trade deficits and sluggish economic growth further weigh on the yen, undermining investor confidence in its long-term value.
The weakening yen has mixed implications for the Korean economy. On the positive side, it stimulates Korean tourism and spending in Japan, as well as boosts Japanese domestic consumption, potentially benefiting regional demand. Korean consumers find Japanese goods and services more affordable, which may increase outbound travel and spending.
However, there are also downsides. A weaker yen enhances the price competitiveness of Japanese exports, posing challenges for Korean exporters—particularly in key sectors like automobiles and semiconductors. Moreover, a cheaper yen may raise Korea’s import costs for Japanese intermediate goods and capital equipment, applying inflationary pressure on domestic production.
Exchange Rate Outlook and Strategic Guidance
The short-term outlook for the KRW/USD exchange rate suggests continued volatility within the 1,370 to 1,390 range, driven by expectations of U.S. Federal Reserve rate cuts and the relative strength of Asian currencies. In the mid-term, the Korean won may face renewed depreciation due to diverging monetary policies between major economies, ongoing global trade uncertainties, and sluggish economic momentum. That said, domestic stabilization measures and Korea’s inclusion in global bond indices may gradually support a firmer won in the second half of the year.
As for the yen, continued weakness is expected in the short term as long as the U.S.-Japan interest rate gap remains wide. The KRW/JPY exchange rate is projected to hover between 960 and 970 per 100 yen. However, by year-end, there is potential for a rebound toward 980 to 1,000 yen if Japan’s macroeconomic fundamentals improve and the BOJ signals a policy shift.
Key Global Risk Factors
Three key global factors will continue to shape currency and financial market dynamics: the timing and magnitude of U.S. interest rate cuts, the outcomes of trade negotiations among the U.S., China, and Japan, and possible changes in sovereign credit ratings, which could trigger capital flow adjustments across risk and safe-haven assets. These variables will be critical for investors and policymakers alike in navigating the remainder of 2025.
Investors are advised to look beyond short-term exchange rate fluctuations and adopt long-term strategies based on macro trends — including rate cycles, structural economic shifts, and diversified currency hedging.
Navigating Volatility Requires Strategic Currency and Market Responses
As of May 2025, the global FX market is marked by dollar rebounds, yen weakness, and won strength, all playing out against a backdrop of rate divergence, shifting trade policies, and sovereign credit concerns. Given this high-volatility environment, both governments and investors must monitor structural shifts closely and adopt proactive strategies to manage financial risk.
“In a time of heightened FX volatility, success depends not on chasing short-term movements, but on anchoring strategies in structural factors like interest rates, trade dynamics, and credit conditions.”
— Comment from a leading financial market expert, May 2025
Copyright © The Value Chain Times. All rights reserved. Unauthorized reproduction, redistribution, and use for AI training are strictly prohibited.
[The Value Chain Times = Aubrey Kim, New York Correspondent]
By Aubrey Kim, New York Correspondent
As of late May 2025, the global foreign exchange market is navigating a complex landscape shaped by a modest rebound in the U.S. dollar index, simultaneous strengthening of the Korean won and Japanese yen, and heightened uncertainty driven by shifting interest rate differentials and evolving trade policies. This article provides a comprehensive look at recent exchange rate movements, their underlying causes, key developments in global financial markets, and the outlook ahead.
Dollar Index Rebounds Slightly to 99.858, Still Below 100
On May 23, the U.S. dollar index (DXY) — which measures the dollar against six major currencies (euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc) — stood at 99.858, up 0.34% from the previous day. Despite this uptick, it remains below the 100 mark, reflecting market sentiment around easing global uncertainties, the cooling of U.S.-China trade tensions, and expectations of a Fed rate cut following weaker U.S. economic indicators.
The index had dipped to 97.92 in late April but recovered slightly in May amid changes in U.S. trade policies, improving economic data, and a modest reduction in financial market volatility. Nonetheless, concerns over U.S. fiscal health, expected rate cuts, and slowing global growth continue to weigh on the dollar’s strength.
Korean Won Strengthens Against Yen: 100 JPY = 960.55 KRW
As of the same date, the KRW/JPY exchange rate stood at 960.55 won per 100 yen, down 3.94 won from the previous day. This reflects the yen’s weakening, driven by Japan’s persistently low interest rates, the Bank of Japan’s dovish stance, and a surge in yen carry trades — where investors borrow yen to invest in higher-yielding currencies like the U.S. dollar.
In May 2025, the BOJ kept its policy rate unchanged at 0.5%, reinforcing its ultra-loose monetary stance. This divergence from U.S. interest rates continued to fuel yen selling. The resulting depreciation has impacted real economies, boosting Japanese export competitiveness and increasing Korean outbound tourism to Japan.
KRW/USD Volatile Around 1,380: Asian Currencies Rise Amid Fed Rate Cut Bets
The Korean won has fluctuated in the low 1,380s against the U.S. dollar, after peaking at 1,487 in early April. Weaker U.S. employment data, expectations of rate cuts, and progress in U.S.-China trade talks helped bring the rate down to a more stable range of 1,370–1,390 throughout May.
On May 2, disappointing U.S. jobs data sparked fresh rate cut speculation, prompting the KRW/USD rate to fall rapidly from 1,405 to the 1,390 range. Since mid-May, the dollar’s modest rebound has stabilized the rate near 1,380. The broader strengthening of Asian currencies — including the won, yuan, and yen — also supports the won’s short-term resilience.
Key Global Market Drivers: Interest Rates, Trade Policy, Credit Ratings
1. U.S. Rate Cycle and Dollar Movements
The Fed ended its rate hikes in 2024 and entered a cutting phase by year-end. In 2025, it has maintained a holding pattern, but softening inflation and weak economic indicators have revived market expectations for further cuts. Lower rates would weaken the dollar and increase capital inflows to emerging markets.
2. Trade Policy Dynamics in the U.S., China, and Japan
Policy shifts under the Trump administration, including evolving U.S.-Japan and U.S.-China negotiations, have increased currency volatility. Speculation that the U.S. may pressure Japan to strengthen the yen has recently supported Asian currencies, including the Korean won.
3. Sovereign Credit Outlook and Investment Sentiment
Recent downgrades or negative outlooks on sovereign credit ratings in major economies like the U.S. and South Korea have heightened investor caution. This has driven a mixed reaction, with flows into both safe-haven assets (dollar, yen, gold) and high-risk assets (emerging market currencies, equities, bonds).
Yen Weakness: Structural Causes and Implications for Korea
The persistent weakness of the Japanese yen is rooted in several structural factors. Chief among them is the significant interest rate gap between the United States and Japan, currently exceeding 4%. This disparity incentivizes investors to engage in carry trades—borrowing yen at low interest rates to invest in higher-yielding assets, particularly in dollars—resulting in ongoing yen depreciation.
Another major contributor is the Bank of Japan’s (BOJ) ultra-loose monetary policy. With continued quantitative easing and a firm commitment to low interest rates, the BOJ is effectively curbing demand for the yen in global currency markets. In addition, Japan’s trade deficits and sluggish economic growth further weigh on the yen, undermining investor confidence in its long-term value.
The weakening yen has mixed implications for the Korean economy. On the positive side, it stimulates Korean tourism and spending in Japan, as well as boosts Japanese domestic consumption, potentially benefiting regional demand. Korean consumers find Japanese goods and services more affordable, which may increase outbound travel and spending.
However, there are also downsides. A weaker yen enhances the price competitiveness of Japanese exports, posing challenges for Korean exporters—particularly in key sectors like automobiles and semiconductors. Moreover, a cheaper yen may raise Korea’s import costs for Japanese intermediate goods and capital equipment, applying inflationary pressure on domestic production.
Exchange Rate Outlook and Strategic Guidance
The short-term outlook for the KRW/USD exchange rate suggests continued volatility within the 1,370 to 1,390 range, driven by expectations of U.S. Federal Reserve rate cuts and the relative strength of Asian currencies. In the mid-term, the Korean won may face renewed depreciation due to diverging monetary policies between major economies, ongoing global trade uncertainties, and sluggish economic momentum. That said, domestic stabilization measures and Korea’s inclusion in global bond indices may gradually support a firmer won in the second half of the year.
As for the yen, continued weakness is expected in the short term as long as the U.S.-Japan interest rate gap remains wide. The KRW/JPY exchange rate is projected to hover between 960 and 970 per 100 yen. However, by year-end, there is potential for a rebound toward 980 to 1,000 yen if Japan’s macroeconomic fundamentals improve and the BOJ signals a policy shift.
Key Global Risk Factors
Three key global factors will continue to shape currency and financial market dynamics: the timing and magnitude of U.S. interest rate cuts, the outcomes of trade negotiations among the U.S., China, and Japan, and possible changes in sovereign credit ratings, which could trigger capital flow adjustments across risk and safe-haven assets. These variables will be critical for investors and policymakers alike in navigating the remainder of 2025.
Investors are advised to look beyond short-term exchange rate fluctuations and adopt long-term strategies based on macro trends — including rate cycles, structural economic shifts, and diversified currency hedging.
Navigating Volatility Requires Strategic Currency and Market Responses
As of May 2025, the global FX market is marked by dollar rebounds, yen weakness, and won strength, all playing out against a backdrop of rate divergence, shifting trade policies, and sovereign credit concerns. Given this high-volatility environment, both governments and investors must monitor structural shifts closely and adopt proactive strategies to manage financial risk.
“In a time of heightened FX volatility, success depends not on chasing short-term movements, but on anchoring strategies in structural factors like interest rates, trade dynamics, and credit conditions.”
— Comment from a leading financial market expert, May 2025
Copyright © The Value Chain Times. All rights reserved. Unauthorized reproduction, redistribution, and use for AI training are strictly prohibited.
[The Value Chain Times = Aubrey Kim, New York Correspondent]