The Korean won to US dollar exchange rate rises amid Middle East tensions, breaking through the 1,480 won mark

The Korean won against the US dollar rose for the second consecutive day amid escalating geopolitical tensions in the Middle East, climbing back to the 1,480 won range. As the United States and Iran continue to confront each other over control of the Strait of Hormuz, the preference for safe assets has increased, and this impact is also reflected in Seoul’s foreign exchange market.

On the 23rd, in Seoul’s foreign exchange market, the daily closing price (based on 3:30 PM) of the won against the dollar rose 5.0 won from the previous trading day, closing at 1,481.0 won. This is the first time in four trading days that the exchange rate has entered the 1,480 won range since reaching 1,483.5 won on the 17th of this month during intraday trading. The rate opened at 1,478.0 won, soared to 1,484.5 won at one point during the day, but the gains narrowed by the close.

This is rooted in the military and diplomatic tensions between the US and Iran. Earlier, despite US President Donald Trump’s decision to extend the ceasefire indefinitely amid market unrest caused by the breakdown of peace talks, Iran continued to demonstrate force by seizing ships in the Strait of Hormuz, maintaining a state of alert. The Strait of Hormuz is a key route for Middle Eastern oil transportation, so instability in the region immediately impacts the overall international financial markets. When risk aversion increases, emerging market currencies tend to weaken, while the dollar generally strengthens.

In fact, the US dollar’s value against major currencies rose slightly. The dollar index, which measures the dollar against six major currencies, increased 0.04% to 98.635. The yen also weakened against the dollar, with the USD/JPY exchange rate rising 0.13% to 150.631 yen. The won/yen cross rate, which compares the won to the yen, was 927.92 won per 100 yen, up 0.67 won from the intraday benchmark at 3:30 PM. The cross rate is the exchange rate used to calculate the value between two less-liquid currencies in the foreign exchange market, using the US dollar as an intermediary.

However, the domestic stock market showed a different trend from the foreign exchange market. The KOSPI index rose 57.88 points (0.90%) to close at 6,475.81, briefly surpassing 6,500 during the day, driven by expectations of improved semiconductor performance. Although foreign investors net sold about 50 billion won worth of domestic stocks, the market’s performance was partly offset by corporate earnings expectations amid geopolitical tensions. Conversely, the won’s response to external variables remains more sensitive, continuing its weakness. Unless the Middle East situation eases, this trend could intensify exchange rate volatility in the short term.