Since March, after the U.S.-Israel airstrikes on Iran, the won-dollar exchange rate has been swinging more than 13 won in a single day. The daily range is the largest since March 2020, during the COVID-19 pandemic.
According to the Bank of Korea's Economic Statistics System (ECOS) on the 8th, the daily range of the won-dollar exchange rate averaged 13.2 won from the 1st to the 6th of this month. This is based on the Seoul foreign exchange market's weekly transaction (9 a.m.–3:30 p.m.).
Compared with past monthly daily averages, it was the largest since March 2020 (13.8 won), when COVID fears intensified. In the meantime, it has been rare for the monthly daily average range to exceed 10 won. In April last year, when tariffs in the United States jolted markets and the exchange rate surged and plunged, the range was 9.7 won.
By volatility, the level is also unusually high. From the 1st to the 6th of this month, the won-dollar exchange rate's average daily percentage change was 0.91%, the highest since 1.12% in March 2020. ▲ 0.36% in Dec. last year ▲ 0.45% in Jan. this year ▲ 0.58% in Feb., marking the third straight month of rising volatility.
With geopolitical risks such as the Middle East crisis expanding, major currencies are weakening against the dollar. Among them, the won is showing a particularly sharp weakness. From the 1st to the 6th of this month, the won's value (Korea closing price basis) fell 2.81% against the dollar. During the same period, the declines were larger than those of other currencies such as the European Union's euro (-1.69%), the Australian dollar (-1.24%), the Japanese yen (-1.21%), the Swiss franc (-1.02%), the British pound (-0.84%), and the Chinese offshore yuan (-0.81%).
Volatility is greater not only in weekly transactions but also in night transactions (3:30 p.m.–2 a.m. the next day). At 12:22 a.m. on the 3rd, the won-dollar rate spiked to 1,505.8 won, surpassing 1,500 won for the first time since Mar. 12, 2009 (intraday high of 1,500 won) during the global financial crisis. As participation in night transactions remains low, even small orders can cause the exchange rate to swing widely.
Going forward, the upper bound of the exchange rate is likely to be determined by how long the Middle East situation persists. KB Securities projected that if the Middle East crisis worsens to the worst-case scenario and international oil prices rise to $120–$150, the won-dollar rate will climb to 1,500–1,550 won.
Meanwhile, it projected ▲ if the situation calms within 1–2 weeks and international oil prices settle at $70–$80, 1,455–1,475 won ▲ if the conflict lasts about one month and oil rises to $80–$100, 1,470–1,500 won. On the 6th, the won-dollar rate closed at 1,476.4 won, up 8.3 won from the previous transaction day.