“Exchange Rate Nears 1,300 Won…Iran Uncertainty Remains a Key Factor” [Weekend Money]

Won-Dollar Exchange Rate Drops to Low 1,400-Won Range
Likely to Fall into the 1,300-Won Range if Iran Uncertainty Eases

An employee is organizing US dollar bills at the Counterfeit Response Center of Hana Bank in Jung-gu, Seoul. Photo by Yonhap News.

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With the won-dollar exchange rate, which once surpassed 1,500 won, having plummeted to the low 1,400-won range, there is a strong outlook that it could enter the 1,300-won range if the conflict between the United States and Iran is resolved.

On August 9, iM Securities explained that the trend of a stronger Korean won has continued from July into August, with the won-dollar exchange rate dropping to the low 1,400-won range as a result of improved dollar supply and demand and enhanced trilateral currency policy cooperation among South Korea, the United States, and Japan.

iM Securities analyzed that the exchange rate fell sharply after an unusual verbal intervention on August 4, when U.S. Treasury Secretary Scott Bessent remarked, “If the yen depreciates significantly, other currencies will follow suit,” and “We have witnessed excessive volatility in the Korean won.” These comments explicitly pointed to the weakness of the won.

Park Sanghyun, Senior Research Fellow at iM Securities, said, “With Secretary Bessent’s recent series of comments and direct interventions in the foreign exchange market, there are opinions that the era of ‘Currency Activism’ has begun. Regardless of the reasons and assessment of the U.S. Department of the Treasury’s intervention, what matters most is that the market is already reacting.”

According to iM Securities, since the U.S.-Japan currency cooperation, the yen-dollar exchange rate has stabilized in the 157-yen range for the time being. Park noted, “Previously, after Japan’s foreign exchange interventions, a rebound—meaning a return to yen weakness—tended to occur, but this time such a rebound has yet to materialize. Heightened caution over further intervention, as well as Secretary Bessent’s implicit expectations for the Bank of Japan’s additional rate hike in September, are contributing to a cautious waiting pattern in the market for now.”

Amid these developments, there are expectations that the Korean won will increasingly track movements of the Japanese yen. Park said, “The alignment between the won and the yen will likely strengthen for the time being, so if the yen appreciates further, the won-dollar exchange rate may approach the 1,400-won mark. In addition to yen fluctuations, multiple factors including dollar supply and demand, which influence the won-dollar exchange rate, are raising the possibility of further declines in the exchange rate.”

Park predicted, “Despite various domestic and external uncertainties, considering the U.S. government’s strong intervention stance and improved domestic dollar liquidity, further downside in the exchange rate is expected. In particular, if uncertainty surrounding Iran is resolved, the likelihood of the won-dollar exchange rate moving down to and remaining in the 1,300-won range will significantly increase.”

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