SEOUL: South Korean authorities are on heightened alert and signaling possible verbal intervention, as a Middle East-driven oil shock keeps pressure on the won, pushing the dollar-won monthly average toward crisis-era levels.
The tougher tone follows the currency’s brief breach of the 1,500-per-dollar mark in Friday (March 13) overnight trading, renewing concern about volatility in the foreign-exchange market.
“Major currencies such as the won, yen and euro are all weakening as the dollar strengthens,” Finance Minister Koo Yun-cheol told reporters in Tokyo on Saturday (March 14) after meeting his Japanese counterpart. “We may turn to verbal intervention if necessary.”
Koo’s remarks suggest Seoul is prepared to step up its response if foreign-exchange volatility worsens, leaving the door open to coordination with Tokyo.
After the meeting, Koo and Japanese Finance Minister Satsuki Katayama issued a joint statement expressing “grave concern” over the sharp depreciation of the won and yen and said the two governments had discussed steps to address excessive volatility and disorderly market moves, with joint action possible if needed.
The won weakened sharply toward the end of the week, breaching the 1,500 threshold in overnight trading Friday, according to Seoul Money Brokerage Services data.
After closing the onshore session at 1,493.7 per dollar, weakening 12.5 won from the previous day, it climbed as high as 1,500.9 in after-hours trading before ending the session at 1,497.5 by 2am, the highest overnight session close so far this year.
The move has pushed March averages deeper into crisis-era territory.
The dollar-won has averaged 1,477 in daytime trading so far this month, the highest monthly average since March 1998, while last week’s average of 1,481 was the highest since the second week of March 2009.
The won’s losses have outpaced both the dollar’s broader gains and declines in other major currencies.
Based on market data, it had fallen 3.84 per cent against the dollar through Saturday, compared with a 2.92 per cent rise in the dollar index, which tracks the greenback against a basket of major currencies.
The won also underperformed the euro, yen, pound and most key Asian peers.
The currency depreciation has tracked a renewed jump in crude oil as the Middle East conflict shows little sign of easing.
After tumbling below $90 a barrel earlier in the week on hopes of de-escalation, Brent reversed sharply higher as tanker attacks and threats to shipping through the Strait of Hormuz revived fears of a prolonged supply shock.
It surged 11 per cent over the week to settle at $103.14 on Friday, its first close above $100 since August 2022.
Korea, which buys around 70 percent of its oil from the Middle East, has been hit especially hard, leaving the won more exposed when regional supply risks intensify and safe-haven demand lifts the dollar.
That vulnerability was on display Monday, when Brent briefly surged to $119.50 a barrel and pushed the won to its highest daytime close of the year at 1,495.5 per dollar.
Market analysts say the won is likely to remain under pressure near the 1,500 level as long as Middle East tensions show little sign of easing and Brent crude stays elevated.
“Dollar-won is likely to remain sticky in the upper 1,400 won range,” said Shinhan Securities analyst Lee Jin-kyung, adding that downside in the pair would remain limited as geopolitical risks keep the dollar supported and risk-off sentiment fuels foreign selling of Korean equities.
“We put more weight on that pattern holding until a mediation framework becomes visible at a US-China summit at the end of March,” Lee said.
KB Securities analyst Oh Jae-young also warned that the won may remain especially vulnerable because Asia has a heavy reliance on energy imports and Middle Eastern supplies.
“Rising oil prices will essentially push dollar-won higher by narrowing Korea’s trade and current-account surpluses,” Oh said, estimating that every $10-a-barrel increase in crude could add about 15 won to the exchange rate, which is already fluctuating in the range of 1,450 to 1,500 won to the dollar. - The Korea Herald/ANN
