The won-dollar exchange rate against the U.S. dollar closed at 1,455.1 won on the 6th. It fell 7.7 won from the prior transaction day.
The won-dollar exchange rate that day was the lowest since Feb. 27 (1,439.7 won), just before the U.S.-Iran war broke out. The move is seen as driven by foreign investors' heavy buying of domestic stocks. When foreigners sell dollars they hold and buy won to purchase domestic stocks, the won strengthens and the won-dollar exchange rate falls.
The KOSPI index closed at 7,384 that day, hitting a record high. It surged 6.5% from the prior transaction day, the second-largest gain on record. Foreign investors were net buyers of 3.5302 trillion won. Individuals sold a net 911.7 billion won, and institutions sold a net 2.2124 trillion won.
Rising expectations for a U.S.-Iran deal also weighed on the won-dollar exchange rate. Both the United States and Iran said talks were making progress and showed restraint from full-scale war. If Middle East tensions ease, risk asset investor sentiment recovers. Demand for the safe-haven dollar falls and the won strengthens, pushing the won-dollar exchange rate lower.
U.S. President Donald Trump said on the 5th (local time), "Significant progress has been made toward a complete and final agreement with Iranian representatives." He added that he would temporarily suspend "Project Freedom," which supports third-country vessels trapped in the Strait of Hormuz so they can get out.
However, some expect the decline in the won-dollar exchange rate to be limited as demand among domestic investors for overseas stock investments expands. As the won-dollar exchange rate falls, corporations' dollar demand to settle overseas payment invoices is also expected to increase.