Opening rate hits 1,530 won, highest since March 31

Closing rate stays above 1,500 for 12 consecutive trading days

Iran attacks US military bases, pushing up oil prices

US imposes 12.5% tariffs, adding to uncertainty

Currency exchange booths in Myeong-dong, Jung-gu, Seoul. [Yonhap]
Currency exchange booths in Myeong-dong, Jung-gu, Seoul. [Yonhap]

By Kim Byeo-ri, The Herald Business

The won-dollar exchange rate surged past 1,530 for the first time in roughly two months, pressured by a stalemate in US-Iran peace negotiations and renewed uncertainty over American tariffs.

The won opened at 1,530 won per dollar in Seoul foreign exchange trading on Thursday, up 13.6 won from the previous session. That is the highest opening rate since March 31, when it stood at 1,519.9 won, and also the highest intraday peak in about two months. It marks the first time the opening rate has exceeded 1,530 won since March 2009, at the height of the global financial crisis.

The won has now closed above 1,500 for 12 consecutive trading days through Tuesday, the second-longest such streak on record. The only longer run was 49 consecutive sessions in late 1997 and early 1998, during the Asian financial crisis. The current streak has already surpassed the nine-day run recorded in March and April, immediately after the outbreak of the Iran war, and the 11-day run in February and March 2009 during the global financial crisis.

The won's persistent weakness reflects a strengthening dollar, driven largely by the failure of US-Iran negotiations to reach a resolution.

In the early hours of Thursday, Iran's Islamic Revolutionary Guard Corps attacked US military installations, including an Air Force base in Kuwait and the US Navy's Fifth Fleet base in Bahrain. The IRGC said the strikes were retaliation for attacks on an Iranian oil tanker and a communications tower on Qeshm Island. The escalating geopolitical uncertainty pushed oil prices and US Treasury yields higher across the board.

Brent crude futures settled at $97.81 per barrel, up 1.9 percent from the previous session, while US West Texas Intermediate futures rose 2.4 percent to $96.02 per barrel. According to the electronic trading platform Tradeweb, the yield on the 10-year US Treasury note was trading at 4.49 percent near the close of New York markets on Thursday, up 0.03 percentage point from the prior session. The 30-year Treasury yield rose 0.02 percentage point over the same period to 4.99 percent.

Tariff risk from the United States has also resurfaced, compounding the pressure. Higher tariffs could reduce South Korean exports and cut dollar inflows, while simultaneously stoking inflationary pressure in the United States and boosting demand for the dollar.

Foreign investors have added to the won's weakness by cashing out of domestic equities. On Tuesday, foreign investors posted net selling of 6.6095 trillion won (approximately $4.36 billion) on the Kospi market — the third-largest net selling figure on record.

Late Wednesday, the US Trade Representative imposed a 12.5 percent tariff on South Korea, citing the country's failure to introduce and effectively enforce a ban on imports of goods produced with forced labor. The USTR had been conducting an investigation under Section 301 of the Trade Act into overproduction and imports of goods made with forced labor, following a federal Supreme Court ruling in February that declared reciprocal tariffs unlawful. With the overproduction probe still unresolved, the forced-labor tariff alone already approaches the 15 percent reciprocal tariff rate agreed upon last year.

"Since early May, upward pressure on the exchange rate has been building from a stronger dollar and rising global interest rates tied to the prolonged war, along with foreign selling in the domestic stock market — and now tariff risk has been added on top of that," said Moon Da-eun, a researcher at Korea Investment & Securities. "To stabilize the exchange rate, the most urgent priority is an end to the war, followed by a decline in oil prices."


kimstar@heraldcorp.com