iM Securities analyzed on the 17th that while the negative signals are clear as the won-dollar exchange rate neared 1,500 won amid fallout from U.S.-Iran tensions, the impact would be limited if it proves short-lived.
Park Sang-hyun, an iM Securities researcher, said, "Since March, the won-dollar exchange rate has been swinging with oil prices, and concerns are growing as the rate approaches 1,500 won." Park noted that if the high exchange rate persists, it could trigger problems such as foreign capital outflows from the stock and bond markets, increased inflationary pressure, higher import prices, and a heavier burden from foreign-currency debt.
However, Park said, "A high exchange rate can negatively affect the domestic economy and financial markets in several ways, but it is not necessarily all bad news," adding, "If the high-rate phase is brief, the negative impact will also be limited."
Park pointed to the path of oil prices stemming from the Iran situation as the key variable determining whether the high exchange rate eases. Park said, "It is still too early to be definitive, but there are some visible signs that a blockade of the Strait of Hormuz, which would directly affect oil prices, could be lifted," adding, "If the Iran situation eases and the strait reopens, oil prices could fall further and the won-dollar rate could stabilize quickly."
In particular, as Iranian Foreign Minister Abbas Araghchi emphasized that it is "closed only to enemies and those who support their attacks," reports that Chinese, Indian, and Pakistani vessels are still passing through the Strait of Hormuz led to the assessment that the fact the strait is not fully sealed is a positive factor.
In addition, the fact that U.S. President Donald Trump faces political and economic burdens from a prolonged Iran crisis was analyzed as a factor increasing the likelihood of behind-the-scenes talks. Park said, "Warning signals are getting louder in U.S. financial markets on the prospect of protracted high oil prices," adding, "This could pressure President Trump's exit strategy."
Park added that if the high exchange rate wraps up quickly, it could instead create a favorable environment for domestic export corporations. Park said, "A high exchange rate can be a burden for corporations with a high share of foreign-currency liability, but for key export sectors such as semiconductors, it is likely to have a positive effect on first-quarter results," adding, "Won weakness will act favorably for the export economy."