It was found on the 15th that the won's value fell sharply this month against major currencies due to the fallout from the Middle East war. The average won-dollar exchange rate also surpassed 1,470 won, marking the highest level since the foreign exchange crisis.
Since the start of this month, the won-dollar exchange rate recorded a two-week average (based on weekly closing prices) of 1,476.9 won. On a monthly basis, this is the highest level since March 1998 (1,488.87 won) during the foreign exchange crisis.
Last week's weekly average exchange rate was 1,480.7 won, topping 1,480 won. This is the highest figure since the second week of March 2009 (1,504.43 won), when the aftereffects of the global financial crisis lingered.
Exchange-rate volatility also widened significantly. The average daily swing was 14.24 won, the largest in about 16 years since May 2010 (16.3 won), when the European debt crisis occurred. The average intraday high-low gap was 24.82 won, the biggest since the start of nighttime trading in the foreign exchange market in Jul. 2024.
The won's weakness stood out even compared with major currencies. From the start of the month through the 14th, the won's decline against the dollar was calculated at 3.84%. That is a steeper drop than the Dollar Index's gain over the same period (2.92%).
Among the major currencies that make up the Dollar Index—such as the euro, yen, and pound—the declines (-3.29% to 0.36%) were smaller than that of the won. Major Asian currencies including the Australian dollar, Taiwan dollar, and the offshore Chinese yuan also fell less than the won.
A key backdrop to the stronger dollar is Korea's high dependence on crude oil imports. With about 80% of its crude coming from the Middle East, Korea is vulnerable to instability in the region or a rise in global oil prices. In particular, with the possibility of a Strait of Hormuz blockade being mentioned, concerns over disruptions to oil supply and demand are seen as contributing to the won's weakness.
Foreign capital outflows also had an impact. Since the start of this month, foreign investors have been net sellers of about 13 trillion won in the KOSPI, adding upward pressure on the exchange rate. In addition, structural dollar demand—such as increased overseas investment by domestic investors—is also cited as a factor weakening the won.
The market also sees a scenario in which, if international oil prices hold around $100 per barrel, the won-dollar exchange rate could stay in the 1,500-won range for an extended period. If the high exchange rate persists, there are concerns it could raise import costs and add pressure on inflation, weighing on the real economy.