Seoul foreign exchange dealers expect range-bound trading in the USD/KRW pair on the 21st as geopolitical uncertainty collides with dollar-selling supply dominance. Pro-Iranian Yemen Houthi rebels declared a Red Sea blockade targeting Saudi Arabia, pushing international oil prices higher and supporting dollar strength. However, active dollar-selling flows—including $26.5 billion in SK Hynix American Depositary Receipt (ADR) conversion demand and export company hedging transactions—are exerting downward pressure on the exchange rate. The New York Non-Deliverable Forward (NDF) market quoted the 1-month USD/KRW at 1,475.20 won, down 2.30 won from the Seoul close after adjusting for swap points.
Geopolitical Factors Drive Dollar Strength
The Yemen Houthi rebels' declaration to blockade the Red Sea targeting Saudi Arabia elevated international oil prices. The dollar index strengthened overnight, creating upward pressure on the USD/KRW exchange rate. US stock market indices fell for the third consecutive trading session.
Supply-Side Pressures Limit Upside
SK Hynix ADR conversion demand totaling $26.5 billion continues to supply dollars to the foreign exchange market. Export companies' hedging transactions are actively contributing to dollar-selling flows. Dealers noted that if domestic stock market weakness persists, custody dollar buying may decline further, reducing demand-side support for the exchange rate. Authorities maintain vigilance over exchange rate movements.
Dealer Range Forecasts
Three bank dealers provided specific range expectations for the 21st:
Bank A Dealer: Geopolitical risks and overnight dollar index strength support upward pressure, but export hedging flows and regulatory caution will cap gains. Expected range: 1,472.00-1,485.00 won.
Bank B Dealer: Overnight rises in oil prices and the dollar suggest early-session upward momentum, but selling flows will emerge at the 1,480 won level to limit the upside. Expected range: 1,475.00-1,485.00 won.
Bank C Dealer: Export hedging and SK Hynix ADR flows create strong dollar-selling expectations. Foreign investors are net buyers of domestic stocks despite market weakness. Geopolitical uncertainty and import demand will support the lower bound. Expected range: 1,473.00-1,484.00 won.
FAQ
What factors are driving the USD/KRW exchange rate on the 21st?
Geopolitical uncertainty from Yemen Houthi rebels' Red Sea blockade declaration and overnight dollar index strength are creating upward pressure. Simultaneously, $26.5 billion in SK Hynix ADR conversion demand and export company hedging flows are supplying dollars to the market, exerting downward pressure.
How does SK Hynix ADR conversion affect the Korean won?
The $26.5 billion SK Hynix ADR conversion demand introduces substantial dollar-selling supply into the Seoul foreign exchange market. This flow strengthens the Korean won by increasing dollar availability and reducing the exchange rate, counterbalancing geopolitical risks that typically support dollar strength.
