The Korean won weakened against the dollar for the first time in five sessions, as surging oil prices and dollar demand from importers outweighed a stronger yen and dollar selling by semiconductor exporters.
The won closed at 1,345.6 per dollar in Seoul on the 8th, down 5.1 won from the previous session's 3:30 p.m. reference rate. The currency opened at 1,344.4 and firmed to 1,336.3 around 11 a.m. before reversing course.
Dollar selling that had driven the won's recent gains continued, but a spike in global oil prices set a floor under the exchange rate. Tensions in the Middle East escalated over the weekend after the United States and Iran traded attacks targeting warships and oil tankers passing through the Strait of Hormuz. West Texas Intermediate crude for October delivery topped $94 a barrel, a three-month high.
Higher oil prices spurred dollar payment demand from importers, while bargain hunting also emerged after the won's sharp recent appreciation. Reports a day earlier that the National Pension Service had suspended its currency hedging were also read as supporting the dollar.
Gains were capped, however, as the yen strengthened and semiconductor companies continued to sell dollars.
The yen briefly rose to 152.892 per dollar, its strongest level since February this year. Buying accelerated as expectations spread that the Bank of Japan will raise interest rates next week, reinforced by solid Japanese economic data.
Japan's second-quarter real gross domestic product growth was revised upward from the preliminary reading, and the July current account surplus beat market forecasts. Nominal wages in July posted their largest increase since 1997, bolstering bets on an early BOJ rate hike.
Japanese Finance Minister Satsuki Katayama reaffirmed on the same day that there had been no change in the policy of coordinated U.S.-Japan intervention regarding recent currency moves. Market participants said Tokyo's determination to defend the yen, combined with expectations of a BOJ rate hike, has triggered an unwinding of accumulated short positions in the currency.
Because the yen and the won tend to move in tandem in global currency markets, the yen's strength limited further weakness in the Korean currency.
Separately, national income data released by the Bank of Korea on the same day showed the won's strength lifting incomes. Nominal gross national income rose 8.8% in the second quarter from the previous quarter.
The central bank said per capita GNI is highly likely to exceed $40,000 this year, provided there are no unexpected shocks and the exchange rate remains stable through the rest of the year. That would pull forward a milestone once expected around 2028, on the back of a stronger won and a semiconductor boom.
