The won-dollar exchange rate has exceeded 1,540 won. It is the record high since the 2009 financial crisis. With international oil prices surging and foreign investors continuing to exit the domestic stock market, downward pressure on the won is growing. The market notes that with jumbo initial public offerings (IPOs) such as SpaceX waiting in the wings, upward pressure on the exchange rate could persist for the time being.
On the 5th in the Seoul foreign exchange market, the won-dollar exchange rate topped 1,540 won during the session. This is the highest level since Mar. 10, 2009, during the financial crisis, when it reached 1,561 won intraday. Since the 15th of last month, the rate has stayed above 1,500 won for 14 straight trading days, and it also topped 1,540 won in overnight trading the previous day.
A major driver of the exchange rate's rise is cited as large net selling of domestic stocks by foreign investors. As the domestic stock market has surged recently, there is analysis that foreign investors are taking profits to rebalance portfolio weights. Weaker risk appetite due to inflation and tightening fears stemming from rising international oil prices also played a role.
When foreigners sell domestic stocks, dollar demand increases as they convert won into dollars and remit funds overseas. Foreign investors were net sellers of 6.9 trillion won in the domestic stock market the previous day, and net selling over the past month (May 4 to June 4) has exceeded 56 trillion won.
The rise in international oil prices is also fanning the won's weakness. As military tensions between the United States and Iran intensify, international oil prices are again trending higher. West Texas Intermediate (WTI) for July delivery is trading around $93 a barrel, and Brent for August delivery around $95. Given the characteristics of Korea's economy, which is highly dependent on energy imports, higher oil prices act as a factor pushing down the won's value. As international oil prices have surged, demand for the safe-haven dollar has also jumped. The dollar index, which shows the dollar's value against the currencies of six major countries, recorded 99.
Despite the government's verbal intervention, the exchange rate has been slow to stabilize. Koo Yun-cheol, Deputy Prime Minister and Minister of Economy and Finance, said at a market monitoring meeting the previous day that "we will take necessary measures immediately against excessive one-sided moves," stepping in verbally. On the 28th of last month, Bank of Korea Governor Shin Hyun-song also issued a warning, saying, "We will respond firmly to herd behavior in the exchange rate."
Analysts say stabilizing the Middle East situation and attracting foreign capital inflows are needed for the exchange rate to fall back into the 1,400-won range. Jeon Kyu-yeon, a researcher at Hana Securities, said, "Normalization of the Strait of Hormuz and the return of foreigners to the domestic stock market are key conditions for a trend reversal in the foreign exchange market," but added, "As Korea's economy continues a solid growth trajectory centered on the semiconductor cycle, the won-dollar exchange rate will gradually decline in the second half."
Some say that with heavyweight global IPOs such as SpaceX and OpenAI piling up, selling pressure from foreign capital outflows could intensify. First, on June 12, SpaceX is set to go public. The fundraising amount is 112 trillion won, the largest for a single deal. OpenAI is reportedly planning a 91 trillion won IPO in September this year. Anthropic is also said to be preparing to go public within the year.
Lee Kyung-min, a researcher at Daishin Securities, said, "SpaceX could act as a black hole for global liquidity, and outflows could especially grow from the KOSPI, which has surged relative to global markets," adding, "Since just two stocks, Samsung Electronics and SK hynix, account for half of the KOSPI's market capitalization, if overheating in the leaders cools and the market enters a supply absorption phase, volatility in the KOSPI will be inevitable."
Dollar demand stemming from expanded investment in the United States is also a factor threatening the exchange rate on the upside. Jeong Yong-taek, a researcher at IBK Securities, said, "Because export corporations to the United States need to secure dollars for future local investments, there is little incentive to convert export proceeds into won," adding, "In fact, the currency of countries expanding investment in the United States, including Korea, Japan and Taiwan, has shown a sharp depreciation against the dollar since last year."