A screen in Hana Bank’s trading room in central Seoul shows the Kospi closing at 2,334.23 points on April 8, up 6.03 points, or 0.26 percent, from the previous trading session. [NEWS1]

 
The won fell to its weakest level against the dollar in more than 16 years on Tuesday amid rising tensions between the United States and China and continued market volatility. While the panic selling seen in recent days appeared to have eased slightly, uncertainty continues to weigh heavily on financial markets across Asia.
 
In Seoul’s foreign exchange market, the won closed at 1,473.2 against the dollar, up 5.4 won from the previous session. This marks the weakest level for the Korean currency since March 13, 2009, when it closed at 1,483.5 won in the wake of the 2008 global financial crisis. The sharp depreciation of the Chinese currency has played a significant role in the won’s decline. According to the Wall Street Journal, the Chinese yuan fell below 7.3 to the dollar for the first time in over a month as of 5 p.m. in Korea.
 
Asian stock markets showed mixed performances. Korea’s benchmark Kospi index recovered slightly by 0.26 percent following a 5.57 percent plunge the previous day. Japan’s Nikkei 225 jumped 6.03 percent, recouping much of its previous 7.83 percent drop. Chinese markets also saw gains, with the Shanghai Composite rising 1.58 percent and the Hang Seng Index climbing 2.31 percent.
 
Taiwan’s Taiex, however, fell more than 4 percent. Southeast Asian markets, including Vietnam and Indonesia, which were closed on Monday, plummeted by more than 6 percent on Tuesday following a new round of U.S. tariffs.
 
Market volatility surged on the back of increased geopolitical tensions and unease among investors.
 
On Monday, the New York Stock Exchange swung dramatically on the circulation of reports — later deemed false — that President Donald Trump was considering a delay in tariff implementation. The Dow Jones Industrial Average dropped to as low as 36,611.78 before rebounding to 39,207.2, a swing of more than 2,595 points within a single trading session — its highest daily fluctuation on record.
 
The CBOE Volatility Index, often referred to as Wall Street’s “fear index,” jumped to 60.13 during intraday trading, the highest level since Aug. 5 last year, when concerns over the unwinding of yen carry trades sent markets into turmoil. The Wall Street Journal noted that approximately $2.4 trillion in market capitalization evaporated and reappeared within hours, underscoring how eagerly investors are reacting to any signals that might stabilize markets.
 
The escalating standoff between Washington and Beijing continues to drive market jitters. 
 
President Trump threatened an additional 50 percent tariff in response to Chinese retaliatory measures on Monday. Beijing immediately responded, stating it would “fight to the end” should the United States continue its trade war. 
 
According to the Associated Press, the total additional tariffs proposed by the United States now amount to a staggering 103 percent. Goldman Sachs estimates that the tariff conflict could shave at least 0.7 percentage points off China’s GDP growth this year. On Friday, international credit rating agency Fitch downgraded China’s sovereign credit rating from A+ to A, its first downgrade of China in 18 years.
 
There are growing concerns that the trade conflict may backfire on the U.S. economy. In a letter to shareholders on Monday, JPMorgan Chase CEO Jamie Dimon warned that “recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession,” The New York Times reported.
 
The U.S. bond market is also showing signs of stress. 
 
Yields on the 10-year Treasury note, a benchmark for global borrowing costs, rose by 16.8 basis points to 4.177 percent on Monday. The yield on the two-year note, which is more sensitive to interest rate expectations, also climbed 10.7 basis points. 
 
This reversal came after six consecutive days of gains in bond prices, suggesting a potential shift in investor sentiment driven by inflation fears and speculation that China, the second-largest foreign holder of U.S. Treasurys, may have begun selling its holdings. A large-scale selloff by China could drive bond prices down and yields up sharply.
 
Korea’s export-driven economy remains particularly vulnerable to the deepening rift between Washington and Beijing.
 
“Unless we hear positive developments from China regarding trade negotiations with the United States today or tomorrow, volatility in the foreign exchange market may expand further,” Wi Jae-hyun, an economist at NH Futures, said.
 
Further depreciation of the won is likely if the trade conflict escalates, Wi added.


Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.

BY YEOM JI-HYEON [[email protected]]