Dollar-Won Exchange Rate Surges to Six-Month High Due to Oil Price Jump

The dollar-won exchange rate has climbed to its highest level in nearly six months, driven by a sharp rise in oil prices in the wake of new U.S. sanctions on Russian crude oil. Mounting inflation concerns have further strengthened the U.S. dollar, while the Korean won has come under pressure, highlighting the far-reaching impact of global energy and geopolitical developments on currency markets.

As of 2:00 a.m. Korean Standard Time on October 24, the exchange rate settled at 1,437.40 won per dollar, up 7.60 won compared to the previous day’s close on the Seoul foreign exchange market. This figure is the highest recorded since April 25, when the rate closed at 1,439.80 won. Nevertheless, the current rate remains slightly below this year’s weekly peak of 1,439.60 won during the same period.

U.S. Intensifies Sanctions on Russian Oil, Fueling Exchange Rate Movement

The dollar-won exchange rate saw significant upward momentum after trading opened in the 1,440-won range in New York, following an announcement of expanded U.S. sanctions on Russian oil companies. The sanctions, targeting major players such as Rosneft and Lukoil, were implemented due to Russia’s continued lack of commitment to meaningful peace negotiations with Ukraine. Rosneft, the world’s second-largest oil producer, plays a pivotal role in global energy markets. As a result, the sanctions have significantly heightened oil price volatility.

West Texas Intermediate (WTI) crude futures for December delivery surged by over 5% on the New York Mercantile Exchange, reflecting the ripple effects of the sanctions. The increase in crude oil prices pushed the U.S. Dollar Index (DXY)—which measures the dollar’s strength against six other major currencies—above 99 during trading in New York. For South Korea, which relies heavily on oil imports, the soaring prices have exacerbated the economic strain, dragging down the won's value. Other oil-importing nations, including Japan, have also felt the adverse effects, with the Japanese yen weakening during this period. Marc Chandler, Chief Strategist at Bannockburn Global Forex, emphasized, “Rising oil prices negatively impact major oil-importing countries like South Korea and Japan.”

Dollar Strength and Domestic Challenges Add to Pressure on the Won

The persistent strength of the U.S. dollar has been further supported by investor anticipation ahead of the release of the U.S. September Consumer Price Index (CPI), which could signify inflationary trends. Domestically, South Korea has faced additional downward pressure on the won amid stalled trade tariff negotiations with the United States. President Lee Jae-myung, during an interview with CNN, shared that the possibility of finalizing a memorandum of understanding (MOU) regarding tariff discussions remains slim in the upcoming Korea-U.S. summit.

Market watchers and analysts have noted that the combination of external factors, including oil price volatility, and domestic trade policy hurdles has weighed heavily on the South Korean currency.

Exchange Rate Activity and Trading Volume Dynamics

The intraday movement of the dollar-won exchange rate demonstrated volatility, ranging between 1,441.50 won at its peak and 1,431.30 won at its lowest point—a swing of 10.20 won throughout the trading session. Overall trading volume in the spot market was significant, totaling $16.62 billion. This volume included transactions processed through the Seoul Foreign Exchange Brokerage and Korea Money Brokerage systems.

Elsewhere in currency markets, the dollar-yen rate rose to close at 152.63 yen per dollar, while the euro-dollar pair ended the session at $1.1609. Offshore, the dollar-yuan exchange rate settled at 7.1232 yuan, illustrating the broader shifts in global currency pairs fueled by geopolitical uncertainties and energy market dynamics.

Additionally, in cross-currency trading specific to South Korea, the yen-won rate finished at 943.07 won per 100 yen, and the yuan-won rate closed at 202.08 won. These figures underscore the changing relationships between major currencies amid heightened global economic uncertainty.

Conclusion: Rising Oil Prices, Sanctions, and Economic Headwinds Challenge Currency Stability

The dollar-won exchange rate’s climb to a six-month high highlights the profound influence of geopolitical events and energy prices on currency markets. With U.S. sanctions on Russian oil intensifying volatility and domestic policy challenges compounding the impact, South Korea finds itself grappling with economic pressures that weaken the won. As oil-import-dependent nations like South Korea and Japan navigate the fallout from surging crude prices and a strengthening dollar, the broader currency market remains vulnerable to shifting global conditions.