The won-dollar exchange rate has surpassed 1530 won for the first time in over two months. This increase is attributed to rising military tensions between the U.S. and Iran, which have driven up international oil prices, along with the impact of additional tariffs imposed by the U.S. Concerns are growing that if the conflict in the Middle East escalates, the upper limit of the exchange rate could rise further.
On June 4, the exchange rate closed at 1529.7 won, up 13.3 won from the previous trading day.
The rate opened at 1530.0 won, marking the first time it has opened above 1530 since March 10, 2009, during the global financial crisis when it was at 1554.0 won. This is also the first time the rate has exceeded 1530 won during trading since March 31.
The exchange rate has remained in the 1500 won range for the past 13 trading days. Despite a strong warning from Bank of Korea Governor Rhee Hyun-sung during a press briefing after the Monetary Policy Committee meeting on May 28, stating, "We will respond firmly to any excessive concentration in the exchange rate. We will not tolerate it," the upward trend has not yet reversed.
Geopolitical instability in the Middle East continues to push the exchange rate higher. With U.S.-Iran peace negotiations faltering and both sides continuing military actions even after a ceasefire, international oil prices are under renewed upward pressure.
Additionally, the U.S. Trade Representative announced on June 2 that it would impose an additional 12.5% tariff on South Korea, leading to continued foreign selling in the domestic stock market and further weakening the won. As a result, foreign exchange reserves decreased to $426.99 billion at the end of last month, down $880 million from the previous month.
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol held a market situation review meeting on the morning of June 4, stating, "In a situation of high external uncertainty, we are closely monitoring to prevent the spread of anxiety. We will take immediate action if excessive concentration occurs."
As the situation in the Middle East is expected to persist longer than anticipated, there are predictions that the upper limit of the exchange rate could rise further. In particular, if the blockade of the Strait of Hormuz continues, there could be a simultaneous increase in global oil inventory depletion and inflationary pressures. The upcoming U.S. Consumer Price Index (CPI) and Federal Open Market Committee (FOMC) results are also likely to exert upward pressure on the exchange rate.
Moon Da-un, a researcher at Korea Investment & Securities, noted, "At the current level, it is difficult to gauge the next upper limit, as any level seems excessive. For now, the pressure is quite high, so we expect that the pace of increase will be moderated with the influx of dollar selling as authorities remain vigilant about interventions at every 10-won increment."
Conversely, some analysts believe that if the Middle East risks subside, the exchange rate could stabilize. Park Sang-hyun, a researcher at iM Securities, stated, "With the easing of high oil price risks, improvements in domestic economic fundamentals, and an expanded current account surplus, the won is likely to strengthen in the second half of the year. If the Middle East risks are resolved, it could quickly fall below 1450 won."
* This article has been translated by AI.
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