An employee at the counterfeit response center of Hana Bank's headquarters holds U.S. dollars in central Seoul, April 3. Yonhap

The strengthening of the U.S. dollar against the Korean currency — nearing the 1,400 won mark — is having varying effects on different people. While tourists and expatriates in Korea welcome the bolstered greenback, Koreans studying in the U.S. or working abroad and receiving their paychecks in Korean won are encountering difficult times.

“My actual monthly income has risen thanks to the soaring exchange rate, as I receive my paychecks in U.S. dollars,” said a 52-year old-office employee working at an international organization in Korea, who wished to remain anonymous.

Tourists visiting Korea are also among the main beneficiaries of the strong dollar.

“As the won-dollar rate has risen somewhat, I think I will be doing more shopping. I am glad I can perhaps invite my friends in Korea to fancier restaurants during my stay there,” said Kim Myung, a Korean American planning to visit Korea during her upcoming vacation.

Furthermore, this period presents a favorable opportunity for trading companies that purchase goods in Korea with dollars and subsequently sell them in the U.S. or other markets abroad.

Those who are planning to pursue a further degree in the U.S. or are currently studying abroad are troubled by the high won-dollar exchange rate. As they have to cover expenses such as university application fees, tuition, dorm rent and meals in dollars, their pre-planned budget for studying abroad has been somewhat jeopardized and now requires more money.

“As the new school year starts in August, one has to set up a payment plan soon for tuition and other expenses. As the won-dollar exchange rate makes a difference of millions of won, let's just wish that the rate will go down,” a student studying in the U.S. wrote on an online community for Korean students studying abroad.

7 percent surge since start of year

The won-dollar exchange rate has surged by over 7 percent since the beginning of this year, surpassing the rises seen during the global financial crisis — a 6.9 percent increase from January to April in 2008 and 5.8 percent during the same period of 2009.

The increase of over 7 percent for four months in a year has not been seen since March 1990 when the country introduced the market average exchange rate system. The exchange rate system changed to a free floating one in 1997.

Amid such a sharp surge in the won-dollar exchange rate, dollar deposit balances at five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — have decreased by over 2 trillion won this month.

The aggregate amount of dollar deposit balances at the five banks stood at $55.8 billion as of last Friday, a decrease of about $1.5 billion from the end of last month. Compared to the end of last year, this represents a decline of $7 billion.

Bank officials report that approximately 70 to 80 percent of dollar-deposit customers are corporations. It has been observed that these corporations have been withdrawing money from their deposits to capitalize on exchange rate gains.

Market analysts forecast that the weak won trend is expected to continue for a while, fueled by several factors, including heightened pressures driving a strong dollar, delays in interest rate cuts by the U.S. Federal Reserve, heightened demand for dollars owing to dividend payments to foreigners, and an escalation of geopolitical tension.

"Despite the won-dollar exchange rate usually fluctuating within the range of 1,000 to 1,200 won since the global financial crisis in 2008, it has failed to revert to this level after surpassing 1,200 won in 2022. This is primarily attributed to Korea's weakened growth momentum, compared to the U.S., and the persistent deficit in the current account balance, rather than concerns in the market about the widening interest rate differential between the two countries," said Ryu Jin-lee, an analyst at SK Securities.

"With the strong growth trajectory of the U.S. economy based on technological innovations and the structural weakening of Korea's export momentum, the won-dollar exchange rate is anticipated to fluctuate within the 1,100 to 1,400 won range in the mid to long term, which is higher than the historical range of 1,000 to 1,200 won," the analyst added.