On the afternoon of the 26th, dealers are working at the Hana Bank dealing room in Jung-gu, Seoul, where the KOSPI closed at 5,460.46, down 181.75 points (3.22%) from the previous session. As of 3:30 PM on this day, the won/dollar exchange rate recorded 1,507.0 won, up 7.3 won from the previous day, and the KOSDAQ closed at 1,136.64, down 22.91 points (1.98%). March 26, 2026  [Photo=Yonhap News]

The Lee Jae-myung administration officially launched on June 4, 2025.

At that time, the won/dollar exchange rate was around 1,362.09 won per dollar. However, by March 26, 2026, the won/dollar exchange rate had risen to around 1,507 won.

Compared to the inauguration, the exchange rate has risen by more than about 10%, and the external value of the won has weakened accordingly.

The numbers on your bank statement may remain the same.

However, the value of assets converted to dollar terms, purchasing power abroad, and resilience against import prices all decrease. This is because the exchange rate is not just a price but a measure of a currency's strength.

There is an even clearer point of comparison. The point when the won's value was strongest in 2025 was June 30.

On this day, the won/dollar exchange rate was 1,350.18 won, the lowest in 2025. Yet, in less than 9 months, the exchange rate rose back to the 1,500 won range.

This means that the won, which was briefly strong immediately after the launch, has been tilting towards structural weakness over time.

The 10 months of the Lee Jae-myung administration are not simply a period of temporary shock, but a time during which the won trended downwards.

What makes this trend even more significant is the Real Effective Exchange Rate (REER).

The Bank of Korea explains the REER as an indicator that reflects the average external real value of a currency, that is, its external purchasing power and price competitiveness, by considering exchange rates and prices with major trading partners.

According to recent reports, Korea's REER has fallen to 63rd place out of 64 countries. This means that the real external value of the won is effectively at the bottom tier.

This shows that the explanation "the dollar is strong, so the won had no choice but to weaken" is insufficient. This is because not all currencies weaken to this extent when facing the same external shocks.

Of course, there were external shocks. In March, geopolitical tensions in the Middle East, rising international oil prices, and risk aversion combined to strengthen the dollar, and risk currencies like the won were the first to be shaken.

Reuters reported that in late March, the won weakened to its lowest level since March 2009. The South Korean government's efforts to expand fuel tax cuts and implement market stabilization measures were also reported.

External variables were clearly the trigger. However, external shocks affect all countries. What matters is which currency is shaken more in the face of those shocks.

The core issue comes next. The exchange rate is both an economic indicator and a psychological indicator. The won does not weaken solely after money is released; the belief that more money will be released first depreciates the won.

The market does not just look at the current money supply but first prices in expectations of how much more won will be supplied in the future, how much fiscal expansion will occur, and how much currency depreciation the government will tolerate to defend the economy.

Indeed, the Lee Jae-myung administration passed a supplementary budget of 31.8 trillion won in July 2025, and in March 2026, a supplementary budget of around 25 trillion won was mentioned. In the foreign exchange market, such signals can be interpreted not just as a response to the economy but as a prospect that "the won could become more abundant."

What is important here is that the economic signals from the Lee Jae-myung administration were not unidirectional.

On the one hand, expectations of supplementary budgets and increased liquidity were read as signals weakening the scarcity of the won. On the other hand, measures to boost the stock market acted as a clear positive factor.

Immediately after taking office, President Lee Jae-myung launched a stock market reform drive, including encouraging dividend increases, resolving the Korea discount, amending the Commercial Act, and strictly punishing unfair transactions. The market responded positively to these measures. Reuters reported that the KOSPI rose to its highest level since January 2022 amid expectations of these reforms. The amendment of the Commercial Act in February of this year was also seen as a measure that fueled expectations for a re-evaluation of the Korean stock market.

Here lies a twist.

Signals were given to boost stocks, but the value of money actually fell. While industries held up and the stock market was boosted, the won weakened. This suggests that the market viewed the direction of currency and policy as more concerning than industries or stock prices.

This is precisely where the current weakening of the won can be interpreted not as a "result of weak industries" but as a "result of expectations of further money printing and policy signals eroding currency confidence." The stock market boost is not a counterargument but rather strengthens the case. This is because the won weakened despite positive developments in the asset market.

The National Pension Service was a major variable in understanding this trend.

In its 2026 asset allocation review, the National Pension Service increased its target allocation for domestic equities and decreased its target allocation for overseas equities. This is an adjustment that could structurally reduce demand for dollar purchases and act as a strengthening factor for the won.

Indeed, Reuters reported that following the announcement of this adjustment, the won strengthened by about 2% in a single day, and that the National Pension Service's overseas investments had been a burden on the won. In other words, the National Pension Service's return to domestic equities and strengthened currency hedging were clearly factors defending the won.

Despite this, the won is creating a trend of weakening. This is the core issue.

Industries are holding up, the government is boosting the stock market, and the National Pension Service is increasing its domestic stock allocation and strengthening currency hedging. If the won remains weak despite these factors, it indicates not just external shocks or temporary supply and demand issues, but deep market distrust of government policies.

This suggests that the market views the direction and sustainability of Korean policies as more precarious than the competitiveness of Korean industries. The problem is not just the amount of money, but more importantly, the trust in how that money will be managed.

This point aligns with the messages from the monetary authorities in the United States and Korea.

In January 2026, the U.S. Treasury Department stated that the weakening of the won was inconsistent with Korea's strong economic fundamentals. Governor Lee Chang-yong of the Bank of Korea also recently commented that the current won/dollar exchange rate level does not adequately reflect Korea's economic fundamentals.

If the currency is excessively weak compared to industries and economic fundamentals, the problem lies not so much with industrial competitiveness itself, but more with won supply and demand, liquidity expectations, policy signals, and market sentiment.

Ultimately, the current weakening of the won is not a result of a collapse in industrial competitiveness. If industries are holding up but the currency has collapsed first, the problem lies outside the factory, not inside.

Expectations of more money to be released, the accompanying supplementary budget sentiment, policy distrust that has not been overcome despite stock market boosts and the National Pension Service's return, and market sentiment that has already priced in these signals have eroded the credibility of the won.

The 1,500 won range for the exchange rate and the bottom tier for the REER are the results of this. While the numbers in your bank account may remain, the power of that money has diminished.

During the 10 months of the Lee Jae-myung administration, what the market has eroded first is not just the price of the won, but the belief in the won.