As the won-dollar exchange rate surged close to 1,500 won amid soaring international oil prices, returns on U.S.-focused exchange-traded funds are diverging sharply. Currency-exposed products and those betting on dollar strength posted higher gains.
According to the Korea Exchange, TIGER US Nasdaq 100 returned 1.1% from April 3, when the "Iran shock" intensified, through April 13. In contrast, currency-hedged products saw larger declines over the same period. TIGER US Nasdaq 100(H) fell 0.8%. TIGER US S&P 500(H), which tracks another major U.S. index, dropped 2.1%—far exceeding the 0.1% decline of its currency-exposed counterpart, TIGER US S&P 500.
Dollar futures ETFs, which profit when the won-dollar exchange rate rises, also posted gains. KIWOOM US Dollar Futures rose 1.9%. KODEX US Dollar Futures Leverage, which seeks twice the return of exchange rate increases, jumped 3.6%. Conversely, KODEX US Dollar Futures Inverse, which profits from dollar weakness, fell 1.8%. KODEX US Dollar Futures Inverse 2X declined 3.8%.
Securities analysts point to the prolonged high exchange rate environment as the key factor widening the performance gap between products. The won-dollar exchange rate closed at 1,493.6 won on April 13 in Seoul's foreign exchange market, up 12.4 won from the previous day, threatening to breach the 1,500 won level. The U.S.-Iran conflict has lasted longer than expected, causing war-related risks to roil international oil prices and trigger extreme volatility in currency markets.
Analysts note that a stronger dollar trend inevitably leads to larger losses for ETFs betting on currency depreciation. Currency-exposed products fully reflect exchange rate movements, meaning a prolonged strong dollar environment could deliver both currency gains and stock price appreciation. Currency-hedged products, which lock in exchange rates to block volatility, reflect only stock prices and are therefore at a relative disadvantage when the dollar strengthens.
Experts forecast that exchange rate volatility will increase further in the near term due to oil price movements and other factors. Shin Seung-jin, head of investment information at Samsung Securities, said, "Geopolitical risks from the U.S.-Iran conflict will continue to weigh on markets. Korea imports substantial amounts of energy, and higher energy import costs will increase import bills, putting upward pressure on the exchange rate."
