South Korea Moves to Boost Global Use of Won

The South Korean won strengthened to around 1,480 per dollar, rebounding from the previous session and approaching its highest level since mid-May, amid South Korea's latest efforts to internationalize the won. The government announced measures to improve foreign access to the currency, including allowing overseas financial institutions to borrow won through temporary overdrafts and use won-denominated bonds as collateral in financial transactions, building on the recent launch of a 24-hour dollar-won trading market. The currency also remained supported after the Bank of Korea raised its benchmark interest rate by 25 basis points to 2.75% last week, marking the start of a new tightening cycle aimed at curbing inflation and supporting the won. Meanwhile, escalating Middle East tensions lifted oil prices and boosted demand for the safe-haven US dollar amid renewed concerns over inflation and US interest rates.

South Korea announced on Sunday plans to further liberalise its currency market by allowing foreign financial institutions to borrow the Korean won through temporary overdrafts and use won-denominated bonds as collateral in financial transactions. The measures are designed to encourage broader international use of the won and support the government's goal of transforming it from a restricted local currency into a more globally traded one. The reforms build on South Korea's recent efforts to open its foreign exchange market, including the extension of dollar-won trading hours to a 24-hour trading cycle from July 6. By improving access to won liquidity and increasing flexibility in funding and collateral management, the government aims to attract greater foreign participation, deepen domestic financial markets, and enhance the global competitiveness of the Korean won.

The South Korean won hovered around 1,480 per dollar, pausing recent gains after climbing to its strongest level since mid-May, as escalating US-Iran tensions fueled a rally in oil prices and dampened risk sentiment. Brent crude rose above $85 per barrel, heading for its biggest weekly gain since April after renewed US strikes on Iran and attacks near the country's main oil export terminal heightened concerns over supply disruptions. Earlier this week, the central bank lifted its benchmark interest rate by 25 basis points to 2.75%, as widely expected, marking its first increase since early 2023 as policymakers sought to curb persistent inflation and support the currency following months of depreciation. The move signaled the start of a new tightening cycle, though the currency's gains were capped by cautious market sentiment amid renewed volatility in technology shares and rising geopolitical tensions.