FX.co ★ South Korean Won Slips Despite Reform Hopes and Global Tailwinds

On Tuesday, the South Korean won weakened to approximately 1,360 per dollar, retreating from its recent highs. This occurred despite sustained investor optimism regarding President Lee Jae-myung's corporate reform strategy aimed at enhancing governance and increasing shareholder returns, which has been favorable for equities. Nonetheless, the won is facing downward pressure due to global and trade-related uncertainties. Rising oil prices, fueled by tensions in the Middle East, threaten to elevate South Korea's import costs. In May, data revealed export prices fell by 2.4% compared to the previous year, signaling subdued global demand even as terms of trade improved. This weaker export perspective limits foreign currency inflows, while increased import costs might exert additional pressure on the won. Furthermore, despite indications of cooling US inflation, the persistent strength of the dollar, buoyed by predictions of postponed Federal Reserve rate cuts, poses a challenge. The won, though relatively steady within the region, remains vulnerable to external shocks, trade uncertainties, and disparities in global monetary policies.