2026.01.0502:45:46UTC+00Korean Won Retreats on Policy Gaps and Regional Tensions

On Monday, the South Korean won depreciated to approximately 1,447 per dollar, pulling back after a short-lived stabilization as investors assessed policy uncertainty following a significant government restructuring and heightened geopolitical tensions. Market apprehension intensified after the government officially divided the Ministry of Economy and Finance into two distinct entities, a change that took effect on Friday and concluded 18 years of consolidated oversight. Officials asserted that this change would enhance planning capabilities, yet investors are concerned about potential policy gaps amid the strengthening dollar and capital outflows. Anxiety increased due to several senior positions remaining vacant and ongoing questions regarding the distribution of responsibilities between the two ministries. Additionally, regional security concerns were exacerbated as North Korea launched missiles on Sunday, coinciding with President Lee Jae Myung’s state visit to China. This visit, his first since assuming office, aims to foster deeper economic collaboration between Seoul and Beijing, focusing on areas such as supply chains, the digital economy, and tourism.