U.S.-Iran negotiations stall, causing the Korean won to slightly appreciate against the US dollar

The South Korean won appreciated slightly against the US dollar on the 28th, due to the lack of progress in the US-Iran ceasefire negotiations, which remain deadlocked.

On that day, in Seoul’s foreign exchange market, the weekly closing price (at 3:30 p.m. benchmark) for the won against the dollar was 1,473.6 won, up 1.1 won from the previous day. After opening at 1,474.1 won, the exchange rate fluctuated within a narrow range, briefly falling to 1,471.6 won during the session. The previous day, amid heightened prospects of a US-Iran ceasefire, the rate plummeted 12.0 won to close at 1,472.5 won, but later rebounded after negotiations stalled and were confirmed to be at a standstill.

Market attention remains on the ongoing tension in the Middle East, which has not eased easily. Especially, the continued blockade of the Strait of Hormuz has raised concerns over energy supplies and disruptions to maritime logistics. This uncertainty has fueled a preference for safe-haven assets, which is interpreted as a factor behind the dollar’s strength. The US dollar index, reflecting the dollar’s value against six major currencies, rose 0.16% to 98.609.

South Korea’s domestic stock market showed a slightly different trend from the exchange rate. The KOSPI index closed at 6,641.02 points, up 25.99 points (0.39%) from the previous trading day, marking a new two-day record high. However, foreign investors net sold 184.5 billion won worth of Korean stocks. Despite the rising stock prices, the foreign exchange market appeared more sensitive to external uncertainties.

The yen’s movement also drew attention. Although the Bank of Japan maintained its benchmark interest rate unchanged, a few dissenting voices hinted at the possibility of a rate hike, strengthening the yen. The USD/JPY exchange rate fluctuated around 159 yen before the announcement, briefly falling to 158.960 yen during the session, then closing at 159.133 yen. Based on this, the implied exchange rate for the won against the yen was 925.60 won per 100 yen, up 1.85 won from the 3:30 p.m. benchmark the previous afternoon.

In the short term, the foreign exchange market is likely to experience sharp fluctuations depending on the progress of US-Iran negotiations, the situation in the Strait of Hormuz, and whether the dollar’s strength persists. If Middle Eastern tensions continue, the won may face depreciation pressure; conversely, signs of negotiations restarting or easing tensions could lead to a stabilization of the exchange rate after recent volatility.