17-year lows: South Korean Won in a downward spiral
- USD/KRW rises as the South Korean Won falls, despite government vows to stabilize the volatile market.
- South Korea's central bank signals rate hikes for inflation, while the finance minister vows to stabilize the currency.
- The US Dollar holds ground as traders evaluate developments surrounding a potential US-Iran peace agreement.
USD/KRW extends its five-day winning streak, trading around 1,540 after hitting 1,549, a level previously seen in March 2009, during the Asian hours on Friday. The South Korean Won continues to decline despite explicit pledges from government officials to curb excessive market volatility.
The KRW’s ongoing weakness highlights the severe pressure on the currency as geopolitical conflict involving Iran persists, with surging oil prices and stalled peace talks driving global capital reallocation.
South Korea's central bank has signaled an imminent pivot toward a more restrictive monetary policy stance to combat rising inflation, while the country's finance minister has vowed to deploy targeted measures to stabilize the foreign exchange market.
South Korea’s economic fundamentals remain notably robust, even as its current account surplus moderated to $28.29 billion in April 2026. While down from the marginally revised, all-time high of $37.93 billion recorded the previous month, April's figure still marks the second-largest monthly surplus on record. This slight month-over-month decline was primarily driven by a narrowing of the goods surplus to $33.88 billion from March's $35.68 billion, even though outbound shipments remained incredibly strong, with exports surging 54.5% year-over-year to easily outpace a 16.1% increase in imports.
Simultaneously, the USD/KRW pair has appreciated as the US Dollar maintains a firm footing on global markets. Foreign exchange traders are actively assessing a complex web of developments surrounding a potential US-Iran peace agreement to end recent hostilities. Tensions remain highly elevated following warnings from Iranian Foreign Minister Abbas Araghchi, who declared that the strategic Strait of Hormuz falls within Iranian and Omani territorial waters and asserted that US regional military bases are active targets for retaliation.
(The story was corrected on June 5 at 3:55 GMT to say in the title 17-year highs and not months.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
