Exchange Rate Surges Above 1,500 Won Again as Foreign Investor Sentiment Weakens and War Fears Mount (Update)

Opened at 1,509.0 Won, Highest Level Since Early Last Month
Foreign Investors Net Sellers of Domestic Stocks for 9 Consecutive Sessions
Rising Global Long-Term Bond Yields and Ongoing Uncertainty Over Middle East Conflict

The won-dollar exchange rate, which appeared to pause briefly, has surged past the 1,500-won mark. This was driven by a decline in investor sentiment, as foreign investors sold off large amounts of domestic stocks. Analysts say that continued uncertainty over a possible U.S.-Iran war, and a resulting preference for the safe-haven U.S. dollar, have pushed the exchange rate higher.

Yonhap News

On May 20, in the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,509.0 won, up 1.2 won from the previous trading day. For the second time in two days, following May 18, the opening price exceeded the 1,500-won threshold. This is the highest opening price in about a month and a half, since April 6 (1,510.3 won). In terms of weekly closing prices (as of 3:30 p.m.), the rate has remained above 1,500 won for three consecutive trading days since May 15.

The recent upward trend in the won-dollar exchange rate is largely seen as a reaction to the heavy selling of domestic stocks by foreign investors. Foreign investors have been net sellers for nine consecutive trading days since May 7. During this period, net sales of domestic stocks have reached as much as 41.2641 trillion won. This has generated substantial demand for currency exchange, causing the value of the won to decline in the foreign exchange market and contributing to the rise in the exchange rate.

Meanwhile, as global long-term government bond yields continue to rise, investor sentiment toward emerging markets' equities has also weakened. In fact, the U.S. 30-year Treasury yield closed at 5.1785% on the previous day, the highest level since July 2007, just before the global financial crisis. The 30-year long-term government bond yields for both the United Kingdom and Japan have also continued to climb.

Despite the U.S.-China summit, the market still views the uncertainty surrounding the Middle East conflict as unresolved, further stoking demand for safe-haven assets. Although U.S. President Donald Trump announced he would postpone plans to attack Iran and end the war soon, repeated reversals of this stance have led to greater disappointment than hope for a ceasefire in the market. The dollar index (DXY), which measures the value of the U.S. dollar against the six major currencies, closed at 99.33 the previous day, up 0.14% from the prior session.

Min Kyungwon, a researcher at Woori Bank, commented, "For the time being, the market is likely to continue reducing exposure to risk assets or increasing cash holdings," adding, "In this environment of high uncertainty, preference for the U.S. dollar is rising, which inevitably increases the burden on emerging market currencies such as the won."

This content was produced with the assistance of AI translation services.