Won–dollar exchange rate eases somewhat… “Cannot rule out 1,500 won in the short term”

Back into the 1,460s after falling for the first time in three days

The won–dollar exchange rate and government bond yields, which had surged after the Iran situation, both fell for the first time in three trading sessions. The move was seen as reflecting some easing in risk-off sentiment after reports said Iran had sounded out the U.S. about negotiations.

On the 5th, in the Seoul FX market, the won–dollar exchange rate (as of 3:30 p.m.) ended daytime trading at 1,468.1 won, down 8.1 won from the previous day (a stronger won). The exchange rate, which had risen 36.5 won since the Iran situation broke out, fell after three sessions. It opened at 1,464 won, down 12.2 won from the prior day, and at one point in the morning slipped to 1,455.5 won. The prospect of U.S.–Iran talks helped calm global risk aversion.

FX authorities said the upward momentum in the exchange rate has cooled, but they are closely watching how the situation unfolds. With Iran categorically denying media reports about negotiations, they said it is difficult to rule out a prolonged war. An FX official said, “For the time being, the exchange rate may continue to move between 1,465 and 1,480 won,” adding, “We believe verbal intervention should be handled cautiously.” Experts are also pointing to the possibility that the exchange rate could spike above 1,500 won in the short term. Moondown, a researcher at Korea Investment & Securities, said, “If international oil prices rise to $90–$100 per barrel, the exchange rate could climb to as high as 1,550 won this month.”

Government bond yields fell across the board (bond prices rose). In the Seoul bond market, the yield on the 3-year Korea Treasury bond closed at 3.189% per annum, down 0.034% point from the previous day. The 10-year government bond yield fell 0.043% point to 3.589%.

Kang Jin-gyu / Nam Jeong-min, reporters josep@hankyung.com