"If the Iran situation escalates, the dollar-won could test as high as 1,525 won" — SangSangIn

SangSangIn Securities said on the 5th that, following Iran's airstrikes, the USD/KRW could rise to as high as 1,525 won if the war escalates.

Choi Ye-chan, an analyst at the brokerage, explained that "Korea’s won has generally reacted with weakness to armed conflicts in the Middle East," adding that "during the 12-day war between Iran and the U.S. and Israel in June last year, the exchange rate jumped 24 won."

He said, "This reflects a combination of factors such as Korea’s heavy reliance on crude oil imports from the Middle East and the risks associated with the peninsula’s division," adding that "a clear trend is also emerging of reducing emerging-market positions, with foreigners’ net selling in Korea’s securities market around the time of the U.S. attack on Iran posting a record high."

He continued, "If foreign selling pressure strengthens as risk-off sentiment stemming from the Middle East combines with profit-taking demand, upward pressure on the exchange rate will likely be unavoidable," and analyzed that "broad-based global dollar strength is also acting as a factor pushing up the USD/KRW."

Choi added, "Historically, after armed issues in the Middle East, the USD/KRW has tended not to come down easily for up to around 90 days," and said, "Considering the possibility that this conflict becomes protracted, we judge that the USD/KRW will for some time reflect an elevated geopolitical risk premium."

Roh Jeong-dong, Hankyung.com reporter dong2@hankyung.com