Won-Dollar Exchange Rate Swings by 16 Won Daily in April... 'Roller-Coaster Warning' Persists Despite Ceasefire Talks

Average Daily Exchange Rate Fluctuation Nears 16.4 Won as of April 8

Surpasses March’s 11.4 Won Amid Escalation of Iran Conflict

Negotiation Process, Including Reopening of Strait of Hormuz, Expected to Be Uneven

Volatility Likely to Persist for Now, “Korean Won Remains Undervalued”

Although the war between the United States, Israel, and Iran has entered a ceasefire negotiation phase, the “roller-coaster warning” for the won-dollar exchange rate has yet to subside. Experts predict that despite the ceasefire talks, the highly volatile exchange rate—having fluctuated by more than 16 won per day on average this month—will continue to show significant volatility for the time being.

According to the Bank of Korea’s Economic Statistics System (ECOS) as of the 9th, the average daily fluctuation in the won-dollar exchange rate (based on weekly closing prices) from the beginning of this month through the 8th reached nearly 16.4 won. Even considering that only a little over a week has passed in April, this fluctuation far exceeds that of March. In March, when the global financial market began to fluctuate due to the war in Iran, the average daily fluctuation in the exchange rate was recorded at 11.4 won. This is the largest volatility in three years and four months since November 2022’s 12.3 won, when the exchange rate plummeted on expectations of a U.S. Federal Reserve policy shift.

This was largely due to the exchange rate, which had been hovering around 1,500 won since the 19th of last month, plummeting by 33.6 won the previous day on news of a two-week ceasefire in the Iran war, quickly returning to levels from a month prior (around the 1,470 won mark). However, the rate opened at 1,480.6 won on this day—up 10.0 won from the previous day—and continued to climb early in the session, once again displaying roller-coaster-like volatility.

In the market, the two-week ceasefire agreement brought temporary relief to the financial market, causing a sharp drop in the exchange rate. However, many believe that such developments are unlikely to lead to a “meaningful end to the war” in the near term. Given that the reopening of the Strait of Hormuz and the subsequent negotiation process remain uncertain, volatility in the foreign exchange market is expected to persist for some time. In fact, while the first round of talks between the United States and Iran is scheduled for the 11th (local time) in Islamabad, Pakistan, Israel has carried out its largest airstrike on Lebanon since the start of the conflict. The Strait of Hormuz, which was temporarily reopened after the ceasefire took effect, has once again been closed.

Choi Seongrak, Head of Capital Flows at the International Finance Center, stated, “With the outlook for negotiations remaining unclear, the market’s view on future impacts is also cautious. It will take time for energy supply through the Strait of Hormuz to recover, and thus, many believe that oil prices are unlikely to return to pre-war levels in the short term.” Sangman Kim, Researcher at Hana Securities, commented, “The burden on Asian countries, including South Korea, which have a high dependence on Middle Eastern energy imports, is steadily increasing. From now on, the key will be how much we can minimize the impact.”

Nevertheless, experts diagnose that even with these international circumstances, the Korean won is currently at its most undervalued level since the global financial crisis. Sanghyun Park, Researcher at iM Securities, stated, “If disruptions in the energy supply chain are prolonged, the exchange rate will likely remain around 1,500 won, but if Iran-related risks are eased—such as the reopening of the Strait of Hormuz—it could quickly return to the 1,450 won range. While an exchange rate in the 1,400 won range may become the ‘new normal,’ a rate in the 1,500 won range reflects an undervalued won, considering the current domestic economic conditions.”

This content was produced with the assistance of AI translation services.