Why it matters. South Korea is a top-10 economy and a key supplier of cars, ships, chips and batteries, so a currency at crisis-era lows ripples into global supply chains and prices.
Background. The won is South Korea's currency; the Bank of Korea is its central bank. The country imports almost all of its energy and raw materials, making it acutely sensitive to oil shocks and a strong dollar, even though giant exporters like Hyundai, Kia and Samsung earn heavily in dollars. 'Verbal intervention' means officials talk down volatility before spending reserves.
What to watch next. Watch whether Seoul moves from words to direct market intervention and how the Fed's rate path and the Middle East conflict evolve in coming weeks.
A 17-year low for the won
South Korea’s currency, the won, plunged to an intraday low of 1,561.5 per U.S. dollar in overnight trading early on June 6, its weakest level since the global financial crisis and prompting the government to convene an emergency review meeting on June 7 to stabilize the market. The slide was driven by surging oil prices tied to the U.S.–Iran conflict, heavy foreign selling in Korean stocks, and growing expectations that the U.S. Federal Reserve could raise interest rates this year.
The 1,561.5 mark — reached in the Seoul market’s after-hours session that ran until roughly 2 a.m. — was the highest since March 6, 2009, when the won touched 1,597 at the depth of the financial crisis. That is a gap of 17 years and three months. During regular daytime trading on June 5, the won had closed at 1,539.1. It has now finished above 1,500 for 14 straight trading days, dating back to May 15.
For ordinary travelers, the strain was even more visible. At airport currency booths, the cost of buying dollars in cash pushed past 1,600 won; Hana Bank, one of Korea’s major commercial banks, quoted 1,624 won at its airport branch.
What is pushing the won down
Analysts cited a cluster of pressures. War in the Middle East has exposed the vulnerability of South Korea, a major economy that imports nearly all of its energy. At the same time, foreign investors who had ridden a rapid rally in Korean stocks have been cashing out, selling won-denominated assets. Stronger-than-expected U.S. jobs data released on June 5 added fuel by reinforcing bets on a Fed rate hike, which strengthens the dollar.
At the emergency meeting, chaired by Deputy Prime Minister and Finance Minister Koo Yun-cheol, the government and the Bank of Korea — the country’s central bank — agreed they would no longer tolerate excessive volatility or one-sided moves in the won. Officials also pointed to offshore non-deliverable forward (NDF) derivative trades as a destabilizing force and said they would begin analysis aimed at making those transactions more transparent.
Despite repeated verbal intervention, market watchers were skeptical of a quick reversal. Jeong Yong-taek of IBK Investment & Securities noted that Korean firms that have pledged large investments in the United States have little reason to convert dollars back into won, a structural drag even if the Middle East war ends. Park Hyung-jung, an economist at Woori Bank, warned that intervention is unlikely to change the won’s downward direction and urged the government to prepare fiscal measures as the weak currency feeds inflation, higher rates, and falling real wages.
An uneven hit across industry
While the Kyunghyang Shinmun newspaper emphasized the exchange-rate milestone and Seoul’s policy response, the Hankyoreh focused on how unevenly a weak won lands across Korean industry. Exporters such as carmakers and shipbuilders see dollar revenues translate into bigger won figures: Hyundai and Kia booked roughly 138 trillion won from their main U.S. units last year, about 46 percent of combined sales. Shipbuilders like HD Korea Shipbuilding & Offshore Engineering also benefit, though hedging caps the gains — the company said currency lifted profit by only about 10 billion won last quarter.
The downsides are broad. Kia said the weak won inflated foreign-currency warranty provisions, denting first-quarter operating profit. Auto-parts makers face dollar-priced costs for U.S. factories amid an electric-vehicle slowdown. Refiners and petrochemical firms buy crude and naphtha in dollars, so the weak won raises costs directly. Domestic-focused food companies such as Ottogi and Lotte Wellfood face pricier wheat, sugar, cocoa, and coffee beans, while export-heavy Samyang Foods fares better. Low-cost airlines, which pay for fuel, leases, and overseas maintenance in dollars, are squeezed by high oil and high exchange rates at once.
Hong Ji-sang of the Korea International Trade Association summed up the risk: in an import-reliant manufacturing economy, a prolonged weak won becomes a problem for industry as a whole, and persistent uncertainty over the Middle East and Fed policy makes a near-term rebound unlikely.
