US-Iran Negotiations Expected to Drive Exchange Rate Volatility

A forecast has emerged that the won/dollar exchange rate will move between 1480 and 1540 won this week. iM Securities identified US-Iran negotiations as a key variable for this week's exchange rate.

US President Donald Trump posted "8 PM Tuesday (7th) US Eastern Time!" on his social media service (SNS) on the 5th local time, which was interpreted as extending the negotiation deadline with Iran by one day from the 6th to the 7th. On the same day, President Trump told The Wall Street Journal (WSJ) in an interview, "If [the Iranian side] doesn't do anything by Tuesday evening, there will be no power plants left, no bridges left intact in Iran." Earlier, President Trump had set March 27 as the negotiation deadline with Iran, which was then postponed to April 6.

Park Sang-hyun, a researcher at iM Securities, analyzed that if military conflict between the US and Iran escalates after the negotiation deadline, a further rise in oil prices could put additional upward pressure on the won/dollar exchange rate. He added that the possibility of further oil price increases is high due to the lack of clear progress in negotiations, which will serve as a material for widening financial market volatility. Park also diagnosed that the fact that West Texas Intermediate (WTI) prices have begun to exceed Brent crude prices could act as an additional source of anxiety for the US financial market and pressure for dollar strength.