Jun Ji-hye, a reporter at the finance desk of The Korea Times, focuses primarily on economic policy and government agencies, mainly covering the Ministry of Finance and Economy, the Ministry of Budget and Planning, the National Tax Service and the Korea Customs Service. She previously covered financial authorities, including the Financial Services Commission and the Financial Supervisory Service, and earlier worked on the political, city and business desks, reporting on a wide range of issues.
Korean won swings sharply on oil prices, foreign capital outflows
The won-dollar exchange rate and the KOSPI index are displayed on an electronic board at Hana Bank headquarters in Seoul, Tuesday. The won ended onshore trading at 1,507.8 won per dollar, weakening 7.5 won from the previous session. Yonhap
By Jun Ji-hye
The Korean won has come under heightened volatility against the U.S. dollar this month amid escalating geopolitical tensions in the Middle East, broad dollar strength and persistent foreign capital outflows, analysts said Tuesday.
The heightened volatility in the foreign exchange market was reflected in the won-dollar exchange rate fluctuating by nearly 70 won over a span of less than two weeks, with the rate closing at more than 1,500 won per dollar for the third consecutive trading session Tuesday after touching an intraday best level of 1,439.6 won on May 6.
In Seoul’s foreign exchange market, the Korean currency ended Tuesday's onshore trading at 1,507.8 won per dollar, weakening 7.5 won from the previous session.
The latest closing level marked the highest since April 2, when it closed at 1,519.7 won per dollar.
Market watchers attributed the won’s weakness largely to rising geopolitical uncertainty in the Middle East and a broad shift toward safe haven assets.
Concerns intensified over the weekend after U.S. President Donald Trump made a social media post on Sunday. “For Iran, time is running out and they must move FAST, or there will be nothing left of them. TIME IS OF THE ESSENCE!” he wrote.
Global oil prices extended their upward momentum as worries resurfaced over a prolonged deadlock in negotiations between Washington and Tehran.
The combination of elevated crude oil prices and rising U.S. Treasury yields also fueled further gains in the dollar. The dollar index, which tracks the U.S. currency against six major peers, continued to climb within the 99 range.
Meanwhile, the yield on 30-year U.S. Treasurys climbed to its highest level since 2007. Market watchers said the sharp increase in bond yields dampened sentiment toward risk assets, leading to stronger demand for the dollar.
The weakening of the Korean won was exacerbated further by heavy foreign selling in the domestic equity market.
Foreign investors offloaded more than 4 trillion won ($2.7 billion) worth of shares on the benchmark KOSPI on Monday, extending their net-selling streak to eight consecutive sessions. Their cumulative net sales over the past seven trading days surpassed 31 trillion won.
Pressure on the local currency was amplified further by instability in Korea’s bond market. Bond yields continued to rise amid uncertainty surrounding labor negotiations at Samsung Electronics and growing concerns over fiscal expansion.
Last Friday, the yield on three-year Korean Treasury bonds jumped 11.2 basis points to 3.766 percent, marking the first time since November 2023 that the benchmark yield surpassed 3.7 percent.
Analysts expect the won-dollar exchange rate to remain highly volatile around the 1,500 won level in the short term. Still, dollar selling by exporters and potential intervention by monetary authorities are likely to limit any further upside movements in the exchange rate.
“Rapid increases in global bond yields are dampening investor sentiment toward risky assets such as equities,” said Min Kyung-won, an economist at Woori Bank. “Since the KOSPI rallied sharply in a short period, foreign investors are increasingly taking profits, and that process is simultaneously increasing demand for dollars and putting upward pressure on the won-dollar exchange rate.”