Won-Dollar Rate Stays Above 1,500 for Fourth Day as Treasury Yields Surge

Won-Dollar Rate Above 1,500 for Fourth Straight Session

Dollar Gains as Investors Turn Wary of Risk Assets

The won-dollar exchange rate climbed as high as 1,513.4 during trading on May 20 as U.S. Treasury yields surged and foreign investors stepped up sales of South Korean stocks. A breakdown in labor talks at Samsung Electronics also added pressure.

In the Seoul foreign-exchange market, the won closed the daytime session at 1,506.8 per dollar, down 1 won from the previous trading day. It stayed above 1,500 for a fourth straight session. The exchange rate rose to as high as 1,513.4 intraday, its highest since May 2, when it touched 1,524.10.

The move reflected growing caution toward risk assets as global bond yields climbed sharply. On May 19, the yield on the 30-year U.S. Treasury bond rose as much as 7 basis points to 5.20%. It was the first time since July 2007, just before the global financial crisis, that the 30-year yield had reached 5.20%.

Long-term government bond yields in Japan and the UK also continued to rise. Concern has grown that inflation could worsen as the closure of the Strait of Hormuz drags on. The dollar index traded above 99.3 during the session for a second straight day.

"The sharp rise in Treasury yields has increased uncertainty across asset markets, boosting demand for the dollar as a safe-haven asset," said Min Kyung-won, an analyst at Woori Bank.

Foreign investors' selling of South Korean stocks also pushed the exchange rate higher. They sold 2.7 trillion won ($2.0 billion) worth of shares on May 20. One bank foreign-exchange dealer said foreign stock flows have recently been driving the won-dollar rate.

In the past, exporters typically sold dollars when the exchange rate moved above 1,500, helping cap further gains, the dealer said. But such dollar selling appears to be lighter than before. Anxiety that the exchange rate could rise further also seems to be building, the dealer added.

Shim Sung-mi, Korea Economic Daily reporter smshim@hankyung.com