Won-Dollar Exchange Rate Holds Mid-to-Late 1400s Ahead of FOMC Event

The won-dollar exchange rate is expected to continue fluctuating in the mid-to-late 1400 won range as favorable supply-demand conditions persist in the foreign exchange market, with the weekly closing rate at 1459.9 won on May 25, down 27.5 won from the prior week. Market participants are awaiting the US Federal Open Market Committee (FOMC) event scheduled during the week. The dollar remains broadly strong, with the dollar index holding above 101, driven by ongoing geopolitical tensions between the US and Iran that have sustained safe-haven demand.

US Military Strikes Iranian Facilities Amid Geopolitical Tensions

US forces struck military facilities across Iran on May 24, targeting locations from the southern city of Abadz to the northern Gilan Province along the Caspian Sea coast, according to Reuters and Bloomberg. The strikes occurred immediately after President Trump warned that "Iran and the Houthi rebels have not yet suffered enough pain" and threatened "major military punishment." The geopolitical conflict has sustained preference for safe-haven assets, supporting the dollar index's position above 101.

FOMC Event and US Q2 GDP Data Scheduled During Week

The market is awaiting the FOMC event scheduled during the week. On May 30, the US will release preliminary Q2 GDP data. Market attention is focused on statements from Federal Reserve Chair Kevin Warsh and the trajectory of the US economy.

Analyst Forecasts Won Strength on Domestic Supply-Demand Factors

Lee Jin-kyung, research fellow at Shinhan Investment & Securities, stated that "external strong-dollar pressure and macro uncertainties such as rising oil prices and interest rates are upward factors for won-dollar," but added that "expansion of current account surplus due to strong semiconductor exports, inflow of export negotiation volumes, and continuation of the Bank of Korea's rate-hike cycle will support downward pressure." Lee further noted that "as the rate is above the early 1400s estimated as the appropriate rate in terms of real effective exchange rate, won strength is expected to have an advantage based on domestic factors."

FAQ

What was the won-dollar exchange rate closing on May 25? The won-dollar exchange rate closed at 1459.9 won on May 25, down 27.5 won from the prior week.

What did the US military do on May 24? US forces struck military facilities across Iran on May 24, targeting locations from southern Abadz to northern Gilan Province along the Caspian Sea coast, according to Reuters and Bloomberg.

Why does the analyst expect won strength? Lee Jin-kyung of Shinhan Investment & Securities cited expansion of current account surplus due to strong semiconductor exports, inflow of export negotiation volumes, and continuation of the Bank of Korea's rate-hike cycle as factors supporting won strength based on domestic supply-demand conditions.