Powell–Middle East war ‘one-two punch’… won–dollar rate breaks past 1,500 again

Hints at a possible US policy-rate hike

Oil shock adds to dollar strength

Koo Yun-cheol: “Will respond if won moves diverge from fundamentals”

The won–dollar exchange rate closed above 1,500 won on a weekly closing basis. It is the first time in 17 years since the global financial crisis. The move reflects a stronger dollar as the war between the United States and Iran intensifies. Remarks by Jerome Powell, chair of the US central bank (Fed), that he “does not rule out the possibility of raising policy rates” also added to volatility.

On the 19th, in the Seoul FX market, the won–dollar exchange rate (as of 3:30 p.m.) ended daytime trading at 1,501 won, up 17.9 won from the previous session. A weekly close above 1,500 is the first in 17 years since 1,511.5 won recorded on March 10, 2009, during the global financial crisis.

The won–dollar rate opened at 1,505 won, up 21.9 won. Soon after the open, verbal intervention by the authorities briefly pushed it down to 1,495 won in the morning, but it failed to hold the 1,500 level.

Analysts say the won fell sharply on reports that the Fed is even considering a policy-rate hike. Concerns over disruptions to crude supply also resurfaced after Iran’s major gas field came under a targeted airstrike, sending oil prices jumping again. The dollar index, which measures the dollar against six major currencies, rose above the 100 level.

Experts said volatility in the won–dollar rate could remain elevated for the time being, depending on the war and oil-price levels. Park Sang-hyun, a researcher at iM Securities, warned that “if the Middle East war drags on beyond April, it could rise to 1,550 won.”

Still, some expect it will be difficult to surge far above 1,500, as the FX authorities have effectively set the 1,500 level as a ‘red line’ and are stepping in verbally. Some analyses point to measures such as the ‘National Pension Service new framework’ and the ‘three FX-stability bills’ as potential caps on upside pressure. Min Kyung-wook, a researcher at Woori Bank, said, “Whenever it moves above 1,500, additional gains are likely to be checked by export firms’ dollar selling and the government’s verbal intervention.”

Reporter Shim Sung-mi smshim@hankyung.com