Korean Won Hits 17-Year Low as Middle East Tensions Mount

The Korean won has plunged sharply as fears of war between the United States and Iran intensify, with the dollar-won exchange rate breaching the 1,500 won threshold.

The won closed at 1,476.2 won per dollar on the Seoul foreign exchange market Friday, up 10.1 won from the previous day and marking three consecutive days of gains in the exchange rate. The rate opened at 1,479 won, up 12.9 won, and climbed as high as 1,484.2 won during intraday trading despite the Bank of Korea's market stabilization messages.

In after-hours trading Thursday, the rate had surged to 1,506.5 won, surpassing the 1,500 won level for the first time in approximately 17 years since the 2009 global financial crisis.

While Friday's daytime trading saw a smaller increase compared to the overnight spike, the rate remained near last year's highs. Even accounting for the thin liquidity typical of after-hours trading, the breach of 1,500 won is viewed as a symbolic event that broke through a key psychological resistance level.

The won's weakness stands out even when compared to other major currencies. According to international foreign exchange market data, the won has depreciated approximately 2.7% against the dollar since April 27, the day before the U.S. and Israel launched airstrikes on Iran.

Notably, the won's decline exceeded that of the Taiwan dollar (-1.4%) and Japanese yen (-0.9%), currencies of economies with similarly high export dependence and significant Middle East crude oil imports. This indicates the won has weakened disproportionately despite facing the same headwind of elevated oil prices stemming from Middle East tensions.

Market analysts point to foreign capital flows as the key variable. They attribute the upward pressure on the exchange rate to increased dollar demand driven by expanded foreign selling of Korean equities amid the recent domestic stock market correction.

"If the war with Iran becomes prolonged, the dollar-won exchange rate is likely to fluctuate within the 1,470 to 1,500 won range," said Jeon Byung-chul, manager at NH NongHyup Bank.