Seoul's foreign exchange market faces competing forces during the week of July 20-24. SK Hynix converts approximately $26.5 billion in American Depositary Receipt proceeds into won while escalating US-Iran military tensions drive safe-haven demand for dollars. The dollar-won exchange rate dropped to 1,477.00 won on May 12 — its lowest level since that date — before surging to 1,491.30 won on July 18 at 1:37 AM as crude oil prices spiked. The Bank of Korea raised its benchmark interest rate by 25 basis points to 2.75 percent last week, marking its first rate increase in three and a half years. Deputy Governor Shin Hyun-song's hawkish comments and exporter dollar sales temporarily pushed the exchange rate below the 1,480 won threshold.
SK Hynix Continues Dollar Sales with Support at 1,480 Won
SK Hynix raised approximately $26.5 billion — equivalent to around 40 trillion won — through its ADR listing. The company plans to use most of these funds for domestic semiconductor production facility investments and began selling dollars sequentially from last week. Market participants attribute the sharp drop in dollar-won from the 1,500 won level to below 1,480 won last week largely to SK Hynix-related transactions. Observers note the conversion process could continue at least until the end of next month given the substantial amount raised.
Hanwha Ocean sold $2 billion in forward exchange contracts through domestic and foreign banks on July 10 to increase its currency hedging ratio. The market remains open to the possibility of additional forward contract sales by Hanwha Ocean. Lee Hyung-ryeol, Director General of International Finance at the Ministry of Economy and Finance, stated on July 14 that foreign exchange market supply-demand conditions improved and herd behavior eased as major companies' forward contract sales began flowing into the market in large volumes.
Importer settlement demand and bargain-hunting purchases consistently support the exchange rate below the 1,480 won level, making further declines difficult according to market observations.
US-Iran Conflict Escalation Boosts Safe-Haven Demand
The US Central Command announced on July 17 local time that two US service members were killed in Jordan and one remains missing. US media outlet Axios reported the United States is sending dozens of aerial refueling tankers to Israel — a move suggesting preparation for long-range airstrikes and raising concerns about potential full-scale war.
Ayatollah Seyed Mojtaba Khamenei, Iran's Supreme Leader, issued a statement warning that the US continuously violated the Memorandum of Understanding and promised to teach the enemy an unforgettable lesson. International oil prices rebounded sharply as Middle East conflict resurfaced. August delivery West Texas Intermediate crude closed trading in the $82 per barrel range, up approximately 4.5 percent from the previous session.
Rising oil prices and geopolitical tensions stimulate preference for safe-haven assets including the dollar, potentially exerting upward pressure on dollar-won. The dollar index finished at 100.729 in near-flat territory on the New York foreign exchange market on July 17 as tech stock selloffs moderated somewhat late in the session. The dollar is expected to monitor new Middle East developments and global stock market trends for direction.
Foreign Stock Flows and Semiconductor Rebound in Focus
Market attention centers on whether additional foreign capital will exit Korea's stock market. Dollar-won frequently moved in tandem with domestic stock markets and foreign stock flows recently. Foreign investors conducted large-scale net selling for profit-taking as the KOSPI rose steeply. Last week adjustments continued centered on semiconductor stocks, and the KOSPI halted its decline at the 6,800 level.
Foreign selling momentum relatively calmed as the KOSPI showed support around 6,800. Foreigners net purchased a total of 222 billion won worth of stocks in the securities market over the past four trading days. However, combining KOSDAQ and NEXT Trade, foreigners net sold nearly 300 billion won worth of stocks during the same period. While overall net selling volume decreased compared to before, the level remains insufficient to lower the exchange rate through capital inflows.
Whether semiconductor stocks can rebound this week is key. Korea's stock market will monitor US tariff policy and major company earnings announcements. The 10 percent universal tariff under US Trade Act Section 122 expires on July 24 without congressional extension approval. Markets focus on the possibility of new country-specific or product-specific tariffs or trade measures being announced. Alphabet and Tesla release second-quarter earnings on July 22 local time, and SK Hynix announces on July 24.
Key Economic Indicators for the Week
Korea's second-quarter Gross Domestic Product growth rate released on July 23 draws attention this week. The Standard & Poor's Global US manufacturing Purchasing Managers' Index announced on July 24 ranks as the most significant indicator overseas. Investors can gauge US manufacturing economic trends through this indicator.
Japan's financial markets close on July 20 for Marine Day. The US June Conference Board Leading Economic Index is released the same day. On July 21, US Automatic Data Processing weekly employment change and July Redbook are published. The UK's May unemployment rate and Eurozone's July ZEW Economic Sentiment Index are also announced.
Korea's June Producer Price Index is released on July 22, and US weekly initial jobless claims are published on July 23. On July 24, as the 10 percent universal tariff under US Trade Act Section 122 expires, US July manufacturing and services PMI are announced. Japan's June Consumer Price Index is also released.
Meanwhile, key US Federal Reserve officials entered a blackout period refraining from monetary policy comments ahead of the Federal Open Market Committee meeting scheduled for July 28-29.
FAQ
What caused the dollar-won exchange rate to drop below 1,480 won last week?
SK Hynix's conversion of approximately $26.5 billion in ADR proceeds into won, combined with the Bank of Korea's 25 basis point rate hike to 2.75 percent and exporter dollar sales, pushed the dollar-won exchange rate to 1,477.00 won on May 12 — its lowest level since that date.
Why did the dollar-won exchange rate surge to 1,491.30 won on July 18?
The exchange rate jumped to 1,491.30 won at 1:37 AM on July 18 as international crude oil prices spiked approximately 4.5 percent following escalating US-Iran military tensions after two US soldiers were killed in Jordan on July 17 local time.
What major economic data releases are scheduled for the week of July 20-24?
Korea's second-quarter GDP growth rate is released on July 23, US manufacturing PMI on July 24, and SK Hynix second-quarter earnings on July 24. The US 10 percent universal tariff under Trade Act Section 122 expires on July 24 without congressional extension.
