South Korean Won Falls on Persistent FX Flows

The South Korean won weakened to around 1,530 per dollar, reversing from levels near 1,520 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. Sentiment also remained cautious amid ongoing uncertainties surrounding developments in the Middle East, keeping risk appetite subdued across Asian markets.

The South Korean won traded near 1,520 per dollar, extending gains from the previous session, as authorities stepped up efforts to stabilize the foreign exchange market. The Bank of Korea and the Financial Supervisory Service launched joint inspections of major foreign-exchange banks for the first time in 14 years, following recent warnings against excessive volatility and speculative trading. Authorities said the inspections would examine whether market participants engaged in activities that destabilized the foreign exchange market or sought to secure improper gains by influencing exchange rates. The currency also continued to recover after sliding to its weakest level since 2009 last week, as traders unwound bearish positions following recent stabilization measures. However, gains were limited by escalating tensions between the US and Iran, raising concerns over disruptions to shipping through the Strait of Hormuz, boosting demand for the US dollar and pushing oil prices higher.

The South Korean won strengthened to around 1,525 per dollar, recovering further after touching its weakest level since March 2009 near 1,560, as authorities and large institutional players stepped up dollar supply to stabilise the currency. State-run National Pension Service reportedly conducted FX hedging, boosting onshore dollar selling, while policymakers continued verbal warnings against excessive volatility and closely monitored market activity. Additional support came from improved risk sentiment after Israel and Iran agreed to a ceasefire, easing demand for safe-haven assets. Continued strength in semiconductor exports and an upward revision to first-quarter GDP growth to 1.8% further supported the won through improved growth and external balance expectations. However, gains were tempered by a firm US dollar as markets reassessed expectations for Federal Reserve easing amid resilient US economic data.