Korean Won Remains Under Pressure

The South Korean won weakened to around 1,500 per dollar on Friday, reversing gains from the previous session. Investors continued to weigh South Korea’s slowing domestic economy and persistent capital outflows despite improving global risk sentiment tied to easing Middle East tensions. Market optimism strengthened after reports indicated that the United States and Iran were moving toward extending their ceasefire arrangement for 60 days while resuming negotiations over Tehran’s nuclear program. Oil prices also eased, with Brent crude falling about 0.4% to near $93 per barrel. At the same time, the US dollar weakened broadly against major developed-market currencies, while Treasury yields declined across the curve during the previous session. Markets also monitored the government’s new reshoring initiative aimed at encouraging overseas Korean firms to return home through broader incentives and more flexible subsidy support for strategic industries.

The South Korean won weakened to around 1,510 per dollar, reversing gains from the previous session, pressured by a firmer US dollar as geopolitical uncertainty and rising oil prices. Market sentiment was weighed by ongoing volatility around US-Iran negotiations, with President Donald Trump saying Washington remained “not satisfied” with talks, while conflicting reports on a possible reopening of the Strait of Hormuz added to uncertainty. Brent crude’s move back toward $96 per barrel further pressured the won, given Korea’s high energy import dependence and sensitivity to external price shocks. Meanwhile, domestic policy signals offered only partial offset, as the Bank of Korea kept its policy rate unchanged at 2.5% for an eighth straight meeting. While the central bank upgraded its growth outlook on stronger semiconductor exports, it also flagged persistent inflation and currency weakness risks, reinforcing expectations for a cautious policy stance going forward.

The South Korean won strengthened to around 1,500 per dollar, rebounding after touching its weakest level since March 2009 near 1,520 on May 22, driven by improved risk appetite as a global AI-driven semiconductor rally boosted demand for Korean assets. Strong gains in technology shares helped lift the KOSPI to a fresh record high, reinforcing inflows into the local currency and supporting sentiment toward export-linked assets. Expectations that the Bank of Korea will maintain a hawkish tone at this week’s policy meeting also underpinned the won amid persistent inflation pressures and resilient economic growth. A state-run think tank raised South Korea’s 2026 outlook to 2.5%, citing robust semiconductor exports and AI-related investment. However, gains remained limited as investors continued to monitor developments in the Middle East, with renewed US military action against Iran keeping concerns over oil prices and imported inflation risks in focus.