• USD/KRW surges to its highest level since March 2009, reflecting heavy pressure on the Korean Won.
• Bank of Korea says it is not targeting a specific FX level but is closely monitoring the market for herd-like behavior.
• The US Dollar Index remains broadly stable near 100.50, suggesting the move is largely driven by KRW weakness.

USD/KRW rallies on Tuesday, trading around 1,529.70 at the time of writing, up 0.93% on the day after hitting an intraday peak at 1,536.04, its highest level since March 2009. The move reflects a sharp depreciation of the Korean Won (KRW) rather than a broad-based strengthening of the US Dollar (USD).

The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, trades nearly flat around 100.50. This divergence indicates that the latest surge in USD/KRW is primarily driven by selling pressure on the Korean currency.

Comments from the Bank of Korea (BoK), reported by Reuters, highlight growing concern about the speed of the Korean Won’s decline. A BoK official said the institution is “closely watching the foreign exchange market situation” and warned that authorities could respond if there are signs of “clear herd-like behaviour” in the market.

The official also emphasized that the central bank is not targeting a specific exchange-rate level, although the recent depreciation of the Korean Won has been “much faster than other currencies”. According to the central bank, the currency’s sharp weakening accelerated after remarks made earlier by the nominee for the next BoK governor.

Meanwhile, the broader US Dollar remains supported by geopolitical developments, although the DXY shows limited movement on the day. A report by the Wall Street Journal indicates that US President Donald Trump is considering ending the military campaign in Iran even if the Strait of Hormuz remains largely closed, a scenario that briefly improved risk sentiment.

On the monetary policy front, Federal Reserve (Fed) Chair Jerome Powell dampened expectations of an imminent interest rate hike on Monday, stating that inflation pressures remain contained for now. His comments pushed US Treasury yields lower and limited the upside momentum of the US Dollar, even as some currencies, such as the Korean Won, continue to weaken sharply.