"Exchange Rate Nears 1,300 Won...Iran Uncertainty Remains a Key Factor" [Weekend Money]

Won-Dollar Exchange Rate Drops to Low 1,400-Won Range
Likely to Fall into the 1,300-Won Range if Iran Uncertainty Eases

An employee is organizing US dollar bills at the Counterfeit Response Center of Hana Bank in Jung-gu, Seoul. Photo by Yonhap News.

The USD/KRW exchange rate, which once surpassed 1,500 won, has plummeted to the low 1,400 won range. There are projections that, should the conflict between the US and Iran be resolved, the rate is highly likely to enter the 1,300 won range.

On August 9, iM Investment and Securities explained that the trend of a stronger won seen in July is continuing into August. They attributed the drop in the USD/KRW rate to the improvement in dollar supply and demand, as well as enhanced policy cooperation between the foreign exchange authorities of Korea, the US, and Japan, which have driven the exchange rate down to the low 1,400 won range.

iM Investment and Securities analyzed that the exchange rate plummeted following a rare case of verbal intervention by US Treasury Secretary Scott Bessent on August 4. Secretary Bessent stated, “If the yen shows a significant weakening, other currencies will follow,” and “We have witnessed excessive volatility in the Korean won,” directly highlighting the recent weakness in the won.

Park Sanghyun, a senior expert at iM Investment and Securities, said, “With Secretary Bessent’s consecutive statements on foreign exchange market intervention and the actual interventions, some are calling this the beginning of a new ‘Currency Activism’ era.” He added, “Regardless of the reasons and evaluations behind the US Treasury’s intervention, what matters is that the foreign exchange markets are now responding.”

According to iM Investment and Securities, after the US-Japan foreign exchange market cooperation, the USD/JPY exchange rate has paused for now around the 157 yen range. Park pointed out, “Looking back on Japan’s recent interventions in the foreign exchange market, there have typically been rebounds—restoring some yen weakness—after interventions. However, in this instance, such a rebound has yet to materialize.” He explained, “The market remains cautious, waiting and seeing, due to the risk of further intervention, as well as concerns over Secretary Bessent’s implicit call for an additional rate hike by the Bank of Japan in September.”

Under these circumstances, there are predictions that the won will also become more sensitive to the yen’s movements. Park said, “The tendency for the won and yen to move in tandem is likely to strengthen for the time being. If the yen continues to appreciate, it is highly probable that the USD/KRW rate will approach the 1,400 won mark,” adding, “Along with yen trends, various factors such as dollar supply and demand, which also affect the USD/KRW exchange rate, are increasing the possibility of further declines.”

Park predicted, “Despite various domestic and international uncertainties, additional declines in the exchange rate are anticipated when considering the US government's strong willingness to intervene in the foreign exchange market and the improving domestic dollar supply conditions.” He added, “In particular, if the uncertainties surrounding Iran are resolved, the probability of the USD/KRW exchange rate not only entering but stabilizing in the 1,300 won range will increase significantly.”

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