The Korean won is trading below 1,500, and near-term moves are tied to developments in the Middle East. A 1,450–1,550 trading range remains in place.
If the war ends, the won is expected to strengthen quickly. Recent won weakness is linked mainly to net foreign selling of Korean equities, described as profit taking rather than panic selling.
Korean equity valuations are described as appealing and are expected to help steady the won. The article notes it was produced with an artificial intelligence tool and reviewed by an editor.
The USD/KRW exchange rate is currently trading below the 1,500 mark. We see the won staying within a wide 1,450 to 1,550 range for the near future. This view is based on ongoing geopolitical tensions in the Middle East.
Any significant moves will likely depend on developments there. The continued risk has kept Brent crude prices volatile, recently trading around $92 per barrel, which directly impacts energy-importing economies like South Korea. This external pressure is the main factor keeping the won from strengthening.
This points towards strategies that benefit from a sudden, large price swing, as a rapid strengthening of the KRW is expected if the conflict ends. Options structures like long straddles could be positioned to capture a breakout from the current range. The implied volatility on USD/KRW options has risen over 5% in the last month, showing the market is pricing in a potential move.
We believe the recent weakness in the won was also driven by foreign investors taking profits from equities. Looking back, we saw a similar pattern of outflows during periods of global uncertainty in 2025. However, with the KOSPI index trading at an appealing price-to-earnings ratio near 11, foreign capital may soon return and put a floor under the currency.
For those expecting the stalemate to continue, range-trading strategies could be considered. This might involve selling options with strike prices outside the 1,450-1,550 band. Be warned, this approach carries significant risk if a sudden de-escalation causes the won to break through the lower end of that range.
We have seen how quickly sentiment can shift, much like it did during the global rate hike cycle a few years ago. The Bank of Korea has held its policy rate steady at 3.50% for over a year, which provides some domestic stability. This policy contrasts with moves elsewhere and will likely keep the won tied to external news flow for now.
