Won-Dollar Exchange Rate Opens at 1,530 Won for First Time in 17 Years and 3 Months (Update)

Tariff Risks from the U.S. and Prolonged Middle East Negotiations

Global Risk Aversion Sentiment Intensifies Rapidly

The won-dollar exchange rate has surpassed 1,530 won at the opening price for the first time in 17 years and 3 months since the global financial crisis. This is attributed to heightened risk aversion as concerns mount over the protracted U.S.-Iran ceasefire negotiations and the spread of tariff risks originating from the United States.

On June 4, in the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,530.0 won, up 13.6 won from the previous trading day. The exchange rate climbed to as high as 1,530.8 won immediately after the opening, before retreating to the mid-1,520 won range.

This is the first time that the won-dollar exchange rate has opened above 1,530 won since March 10, 2009 (1,554.0 won) during the global financial crisis. The last time the rate exceeded 1,530 won during intraday trading was March 31, when it hit an intraday high of 1,536.9 won. As a result, the exchange rate has remained above the 1,500 won mark for 12 consecutive trading days based on the closing price.

The first factor driving the rise in the won-dollar exchange rate is renewed concerns over prolonged negotiations in the Middle East. On June 2 (local time), after an Iranian oil tanker and a communication tower on Qeshm Island were attacked, Iran's Islamic Revolutionary Guard Corps (IRGC) retaliated with attacks on the U.S. Air Force base in Kuwait and the U.S. Navy's Fifth Fleet base in Bahrain. The air raid on Kuwait's airport resulted in casualties, and both human and material losses have become apparent.

Consequently, global risk aversion has intensified, leading to simultaneous increases in international oil prices and the value of the dollar. On the New York Mercantile Exchange, West Texas Intermediate (WTI) crude for July delivery closed at USD 96.02 per barrel, up 2.41% from the previous session. Brent crude for August delivery also rose 1.81% to close at USD 97.81 per barrel. The dollar index, which measures the value of the dollar against six major currencies, dipped slightly to 99.44 from the previous session's 99.53, but it is showing a notable upward trend compared to June 2 (99.15).

The U.S. Trade Representative's (USTR) announcement of impending tariffs is also analyzed as a factor fueling the won's weakness. On June 2 (local time), the USTR stated that it plans to impose a 12.5% tariff on South Korea, citing Section 301 of the Trade Act, due to Korea's failure to enforce import bans on goods produced with forced labor. Higher tariff barriers diminish the export capacity of domestic companies and reduce dollar inflows. There are also concerns that renewed inflationary pressures in the United States will stimulate demand for dollars. In fact, during the offshore non-deliverable forward (NDF) market on the previous day (June 3), when the domestic foreign exchange market was closed due to the June 3 local elections, the won-dollar exchange rate had already soared to 1,536 won.

Park Hyungjung, economist at Woori Bank, explained, "While the U.S.-Iran negotiations are repeatedly stalling, instability in international oil prices is persisting," adding, "In the past, the government intervened in the market when the rate was in the 1,530 won range." He continued, "With international interest rates rising and the dollar strengthening, coupled with uncertainty over the U.S. Federal Reserve's monetary policy in the second half of the year, it is difficult to predict the upper limit of the exchange rate under the current circumstances."

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