The won-dollar exchange rate fell sharply as risk aversion in global financial markets eased following news that US President Donald Trump agreed to a two-week ceasefire with Iran.
The won-dollar exchange rate closed at 1,470.6 won on the Seoul foreign exchange market on the 8th, down 33.6 won from the previous trading day. During the session, the rate touched a low of 1,471 won, fluctuating in the low 1,470 won range.
The exchange rate opened at 1,479.9 won, down 24.3 won from the previous day. This reflected rapidly improving investor sentiment after news emerged before the market open that the US and Iran had agreed to a ceasefire mediated by Pakistan.
However, analysts suggest upward pressure on the exchange rate cannot be ruled out during future negotiations. Baek Seok-hyun, an economist at Shinhan Bank, wrote in a report that day, "The market initially welcomed news of the two-week ceasefire and the opening of the Strait of Hormuz," but added, "There is a high likelihood of friction from the early stages of negotiations, and the market will reassess the reality of uncertain negotiation prospects."
He presented President Trump's options as: a comprehensive peace agreement, ceasefire extension, friction due to partial implementation by Iran, or breakdown of negotiations and resumption of military conflict. He added, "The key to the success or failure of negotiations is the extent to which President Trump can control Israel over the next two weeks."
Meanwhile, a relief rally across assets led US Treasury yields to extend their decline in Asian markets. As international oil prices fell below $100 per barrel, inflation concerns eased, and discussions of US rate cuts are regaining momentum.
According to the CME FedWatch tool, the interest rate futures market is pricing in a 55% probability that the Federal Reserve will cut the benchmark rate by the end of this year. Until the previous day, expectations for rates to remain unchanged were dominant, but market expectations shifted rapidly in just one day.
