Korean Won Retreats After Multi-Month High

The South Korean won weakened to around 1,538 per dollar, reversing sharply from its recent advance near 1,508, as the dollar remained firm following the Federal Reserve’s policy decision. The Fed kept rates unchanged but signaled a higher policy path than previously projected, reinforcing expectations of tighter financial conditions and supporting broad-based USD demand. The won also came under pressure from ongoing portfolio rebalancing flows and steady demand for the US currency across regional markets. Meanwhile, expectations that the Bank of Korea could maintain a tighter policy stance for longer helped limit downside pressure on the won. The central bank said inflation is likely to remain above target through next year, while policymakers warned that higher energy costs and exchange-rate pass-through effects could continue to fuel price pressures. Authorities’ continued monitoring of foreign exchange volatility also reassured markets.

The South Korean won strengthened to around 1,508 per dollar, extending its recovery after touching its weakest level since March 2009 near 1,560, as global demand for safe-haven assets eased following progress toward a US-Iran agreement. Washington and Tehran reached a framework aimed at ending their monthslong confrontation and restoring passage through the Strait of Hormuz, reducing tail-risk concerns around energy flows and supporting broader financial stability. Oil prices fell sharply on the news, easing inflation pressures and improving South Korea’s external cost outlook. The shift in sentiment weighed on the US dollar and supported risk-sensitive Asian currencies, with the won among the better performers, while a sharp equity rally in Seoul further underpinned risk-on flows. In addition, recent discussions between South Korean and US officials on foreign-exchange market conditions signaled closer monitoring of recent volatility.

The South Korean won weakened to around 1,520 per dollar, reversing from levels near 1,516 in the previous session amid persistent foreign-exchange flow pressures. Overseas investors extended their selling streak in local equities, even as domestic retail participation continued to support the stock market. Authorities stepped up oversight of non-deliverable forward trading and reiterated calls for exporters to promptly convert overseas earnings into won to support dollar supply conditions. Policymakers also maintained close monitoring of major banks and reaffirmed measures aimed at curbing excessive speculation and stabilizing the foreign-exchange market. Meanwhile, sentiment showed improvement following renewed hopes of a US-Iran agreement after President Trump said the US was nearing a deal and had called off planned military strikes. BOK rate hike expectations, reinforced by Governor Shin Hyun-song’s tightening remarks, also provided some offsetting support.