The Korean won surged against the dollar in intraday trading, briefly pushing the exchange rate into the 1,340-won range, before erasing all of those gains as bargain buying emerged. Exporters continued selling dollars ahead of the Chuseok holiday and the close of the quarter and month, and reviving risk appetite added to early won strength. But as the exchange rate fell quickly, demand-driven dollar buying, including settlement payments by importers, flowed in.
The won-dollar exchange rate closed at 1,358.4 on the 23rd in the Seoul foreign exchange market, up 0.2 won from the previous session. The rate opened at 1,355.0 and fell further during the session, moving well below the 1,350 line after a 22.8-won plunge the previous day, before paring losses to finish slightly higher.
Dollar supply clearly dominated early in the session. Exporters brought forward their dollar sales ahead of the Chuseok holiday, and the seasonal factor of the quarter-end added to the onshore dollar supply. Long-stop selling following the previous day's large-scale dollar sales also added to downward pressure on the exchange rate.
Risk appetite also supported the won. In New York overnight, the Nasdaq composite rose 0.45% to a record closing high for a second consecutive session, while oil prices fell on news of strong crude exports from the Middle East. Brent crude slipped below $100 to $99.25 a barrel. Expectations that tensions in the Middle East could ease, as hopes persisted for a resumption of talks between the United States and Iran, also supported demand for risk assets.
The mood changed once the rate entered the 1,340-won range. As the exchange rate dropped rapidly over a short period, demand-driven dollar buying, including settlement payments by importers, supported the floor. Demand from residents converting won into dollars for purposes such as overseas stock investment was also cited as a factor behind the bargain buying.
Dollar strength remains a factor limiting further declines in the won-dollar rate. The hawkish stance of the U.S. Federal Reserve and rising U.S. Treasury yields remain supportive of the dollar, while the situation in the Middle East is also a variable.
In particular, U.S. President Donald Trump's Iran policy has swung between negotiation and military pressure, leaving related uncertainty in place. As a result, analysts said dollar buying demand is unlikely to weaken entirely even if risk appetite continues.
Market participants expect dollar sales ahead of the Chuseok holiday and month-end to weigh on the exchange rate for the time being. But some observers said settlement demand and bargain buying are more likely to emerge in the 1,340-won range, which could increase volatility depending on supply and demand.
Meanwhile, the Seoul foreign exchange market will not close during the Chuseok holiday. Since shifting to 24-hour trading in July, won-dollar trading has been possible even on public holidays. Still, with domestic stock and bond markets closed, trading volume is expected to fall sharply from normal levels during the holiday.
Some banks will keep their dealing rooms running through the holiday, while others plan to participate in the market through overseas desks. Foreign exchange brokerages will also assign essential staff to operate electronic brokerage systems. The Ministry of Finance and Economy and the Bank of Korea plan to continue monitoring the foreign exchange market during the holiday.
With the market open through the holiday, offshore investors will retain access to won trading, drawing attention to whether the 24-hour trading system can take hold in practice.
