South Korean Won Falls to Over 3-Week Low

The South Korean won traded around 1,545 per dollar, extending losses near its lowest level in over three weeks as geopolitical tensions in the Middle East lifted oil prices and boosted demand for the US dollar. The United States launched fresh strikes on Iranian military targets after Tehran attacked shipping near the Strait of Hormuz, while uncertainty over renewed negotiations between the two countries continued to fuel investor caution. Markets also remained focused on the Federal Reserve's annual policy forum in Sintra and key US labor market data due later this week, with expectations for higher-for-longer US interest rates supporting the greenback. Meanwhile, investors monitored President Lee Jae Myung's announcement of large-scale investments in semiconductors, AI, and data centers, as the government and major chipmakers prepared to unveil long-term investment plans aimed at strengthening South Korea's advanced technology sector.

The South Korean won weakened to around 1,545 per dollar, extending losses to its lowest level in three weeks as a firmer US dollar and persistent foreign equity outflows weighed on the currency. The greenback remained supported after US core inflation reached its highest level since October 2023, reinforcing expectations that the Federal Reserve could keep interest rates higher for longer. At the same time, official data showed offshore investors recorded a record net selloff of Korean stocks in May, underscoring that persistent foreign equity outflows remain a key headwind for the won, even as the country's AI-driven earnings outlook stays favorable. Limiting further losses, oil prices remained subdued as easing concerns over Middle East supply disruptions improved the outlook for the energy-importing economy. Authorities also rolled out broader discounts on agricultural and fishery products to keep inflation around 3% in the second half following May's 26-month high of 3.1%.

The South Korean won traded around 1,535 per dollar, extending losses to its lowest level in over two weeks after MSCI kept South Korea in its emerging-market category. MSCI cited persistent foreign-exchange market accessibility issues, including limited offshore won convertibility and insufficient liquidity during extended trading hours, delaying South Korea's progress toward developed-market status. Additionally, the US dollar remained relatively firm as investors continued to assess the outlook for US monetary policy. Meanwhile, the Bank of Korea reinforced its hawkish stance, signaling that higher interest rates may be needed at an appropriate time as rising housing prices, household debt, and leveraged investments threaten to fuel financial imbalances. Limiting further losses, oil prices declined as improving shipping conditions in the Strait of Hormuz eased concerns over energy supply disruptions, providing some relief for the energy-importing economy.