Korean won plunges to new 17-yr low against U.S. dollar as Iran crisis persists

· UPI

The South Korean currency fell sharply to its weakest level in 17 years against the U.S. dollar Thursday amid intensifying tensions in the Middle East and the subsequent surge in global oil prices.

The won was quoted at 1,501 won per dollar, down 17.9 won from the previous session, marking the lowest level since March 10, 2009, when the won hit 1,511.1 during the global financial crisis.

The foreign exchange and stock markets have shown heightened volatility since the beginning of this month following the U.S.-Israeli attacks on Iran. On Monday, the won touched the 1,500-won level for the first time since March 2009 in intraday trading.

The weakness came as global oil prices rose more than 5 percent on Wednesday (U.S. time), following Israel's attack on natural gas facilities linked to Iran's South Pars field, the world's largest gas field.

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In response, Iran's Revolutionary Guard threatened to target oil and gas facilities in Qatar, Saudi Arabia and the United Arab Emirates, heightening the risk of further disruptions to energy supplies, according to foreign media reports.

Hawkish remarks by Federal Reserve Chair Jerome Powell regarding the situation in Iran also added pressure on the won.

At a press conference following the decision to hold the benchmark interest rate steady Wednesday (U.S. time), Powell said the surge in oil prices has increased inflationary pressures, signaling a cautious stance on the timing of further rate cuts.

"Escalating tensions in the Middle East have increased upward pressure on oil prices, which has weighed on the won," Lee Min-hyuk, a researcher at KB Kookmin Bank, said. "A stronger U.S. dollar, driven by the Fed's hawkish stance, is also pushing the won lower."

The Fed decided to leave the rate unchanged at the 3.5-3.75 percent range for the second consecutive time, while maintaining its projection of one rate cut this year.

The U.S. Dollar Index, which measures the greenback against a basket of six major currencies, climbed well above the 100 level.

"We will closely track FX market conditions and take timely action if the movement of the Korean won deviates excessively from its underlying fundamentals," Finance Minister Koo Yun-cheol said during a meeting on macroeconomic and financial issues earlier in the day.

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