South Korean Won Firms As Authorities Pledge Action

The South Korean won gained to around 1,540 per dollar, rebounding after touching its weakest level since March 2009 near 1,560, as authorities moved to contain speculative FX activity and market volatility. Top policymakers from the Finance Ministry, Bank of Korea, Financial Services Commission, and Financial Supervisory Service vowed to closely monitor the market and investigate suspected disruptive trading activity. However, gains remained limited by broad dollar strength after unexpectedly strong US labor market data prompted investors to scale back expectations for Federal Reserve easing. Continued foreign selling of Korean equities also fueled demand for dollars. Additional headwinds came from renewed Middle East tensions after reports that Iran fired missiles at Israel, boosting safe-haven demand for the greenback and raising concerns over higher energy costs for South Korea.

The South Korean won fell near 1,560 per dollar, marking its weakest level since March 2009, as heightened Middle East tensions weighed on broader risk sentiment. Developments in Lebanon, including Hezbollah’s rejection of a ceasefire proposal, alongside continued Israeli military activity, kept concerns over potential disruptions to regional energy supply routes in focus. Safe-haven demand for the US dollar also strengthened amid the broader risk-off environment. Additional pressure came from a sharp equity selloff in Korea, with the KOSPI heading for its steepest weekly drop in over two months amid a global semiconductor downturn, prompting continued foreign fund outflows. Meanwhile, authorities said they were taking "extra vigilance" over volatility in financial and foreign exchange markets. At the same time, South Korea posted its second-largest current account surplus on record in April at $28.29 billion, supported by robust semiconductor exports.

The South Korean won crossed 1,500 per US dollar, touching its weakest level since March 2009, despite government pledges to curb excessive volatility. The decline highlights the pressure on Asian currencies as the Iran war persists, with higher oil prices and stalled peace talks driving capital reallocation. External factors, including a sharp rally in domestic stocks prompting foreign investors to rebalance portfolios, have also weighed on the won. Meanwhile, data this week showed South Korea’s inflation rate surged in May to its highest level in over two years, while exports grew more than expected to a record $87.75 billion, fueled by a global AI investment boom that pushed chip sales to new highs. Finance Minister Koo Yun-cheol stated that authorities are closely monitoring FX markets "with a high degree of vigilance to prevent anxiety from spreading" and vowed to take "prompt, necessary measures" in case of excessive market moves. The won has lost over 6% of its value this year.