The USD-KRW exchange rate tested the lower end of the 1,450 won range on July 27, driven by selling pressure from SK Hynix's American Depositary Receipt (ADR) fund conversions and export company settlements. SK Hynix's large-scale dollar selling, combined with exporter settlements ahead of month-end, intensified downward pressure on the exchange rate. Month-end settlements typically bring more active export company transactions, while World Government Bond Index (WGBI) inflows tend to concentrate at month-end, adding to dollar selling volume.
SK Hynix ADR Conversions and WGBI Inflows Drive Selling Pressure
SK Hynix's ADR fund conversions created consistent selling pressure in the USD-KRW market. Export companies increased settlement volumes approaching month-end, adding to the supply-side imbalance. WGBI inflows historically concentrate at month-end periods, contributing additional dollar selling volume. Buying interest at lower levels remained subdued, limiting rebound attempts. The 1,450 won level showed relatively solid support, though external conditions supported downward movement.
US-Iran Military Confrontation Pauses After Consecutive Airstrikes
The United States and Iran halted airstrikes and retaliatory attacks, reducing Middle East-related risk sentiment. Iran's military announced on July 24 that it suspended retaliatory operations after the US did not conduct airstrikes for two consecutive days. Reports indicated the US withheld attacks due to concerns about air defense missile shortages. The pause in military confrontation reversed trends in dollar strength and international oil prices. Iran's Foreign Ministry stated it is exchanging messages with the United States while mediation efforts continue. US Ambassador to the UN Mike Waltz explained that President Donald Trump is providing time for negotiations. The dollar index declined to around 101.3 in early Asian trading, while West Texas Intermediate (WTI) crude futures dropped sharply to the $84 per barrel range.
Japanese Yen Weakness Approaches Intervention Threshold at 164 Yen
The USD-JPY exchange rate surpassed 163 yen and approached the 164 yen level for the first time in approximately 40 years. Japanese authorities continued verbal intervention and maintained close coordination with the United States. Market participants assessed that the probability of actual intervention increased in the near term. Any intervention-driven decline in USD-JPY could pull USD-KRW lower. Foreign investors sold 3.2 trillion won in stocks on the Korea Exchange on July 24. The Dow Jones Industrial Average rose 0.46% and the S&P 500 gained 0.05% on July 24, while the Nasdaq Composite declined 0.64% and the Philadelphia Semiconductor Index fell 4.25%.
Fed and BOJ Policy Meetings Scheduled for July 29 and July 31
The Federal Reserve will announce its monetary policy decision on July 29, followed by the Bank of Japan on July 31. The United States will release second-quarter GDP data and the June Personal Consumption Expenditures (PCE) price index on July 30. SK Hynix will announce earnings on July 29, with Samsung Electronics following on July 30. Microsoft and Meta will report results on July 29, while Apple and Amazon are scheduled for July 30. The US will release June durable goods orders and the July Dallas Fed Manufacturing Index data. The Bank of Korea will publish June foreign currency deposit trends for residents on July 27. USD-KRW closed the week at 1,458.50 won at 6:00 AM on July 25. The one-month USD-KRW Non-Deliverable Forward (NDF) in New York quoted at 1,459.10 won (MID), representing a 7.20 won decline from the Seoul market close of 1,466.60 won after accounting for the recent one-month swap point of -0.30 won.
FAQ
What caused USD-KRW to test 1,450 won on July 27?
SK Hynix's ADR fund conversions created large-scale dollar selling pressure, combined with increased export company settlements ahead of month-end. WGBI inflows typically concentrate at month-end, adding to dollar selling volume in the market.
Why did the US-Iran military confrontation pause?
Iran's military announced on July 24 that it suspended retaliatory operations after the US did not conduct airstrikes for two consecutive days. Reports indicated the US withheld attacks due to concerns about air defense missile shortages. Iran's Foreign Ministry stated it is exchanging messages with the United States while mediation efforts continue.
When are the Fed and BOJ policy meetings scheduled?
The Federal Reserve will announce its monetary policy decision on July 29, and the Bank of Japan will make its announcement on July 31. The United States will release second-quarter GDP data and the June PCE price index on July 30.
