The USD-KRW exchange rate opened lower, driven by a renewed appetite for risk following hopes of an end to the Middle East conflict.

In the Seoul foreign exchange market on Friday, the USD-KRW rate started at 1,518.0 KRW (about 1.00 USD), down 10.9 KRW (about 0.0072 USD) from the previous day's 3:30 p.m. (Korean time) closing price.

Analysts attribute the drop in the dollar-won rate to perceptions that the Middle East crisis is entering its final stages.

On Thursday, President Donald Trump announced that peace negotiations with Iran were in their final phase, with only document finalization remaining.

Speaking at the White House before signing a proclamation, Trump stated that they've just reached an excellent agreement regarding the conflict with Iran, and it's now only finalizing the paperwork.

However, Iranian Foreign Ministry spokesman Esmail Qaani emphasized that a final conclusion on the peace agreement with the U.S. had not yet been reached, adding that the outcome would be made public as soon as it was achieved.

While Iran has only stated that an agreement is not yet finalized, without outright denial, analysts suggest that peace talks are nearing a substantial agreement.

As a result, July futures for West Texas Intermediate (WTI) crude oil have plummeted to around 86 USD per barrel, while Brent crude futures have fallen to about 88 USD.

Min Kyung-won, an economist at Woori Bank, noted that it should consider that the weaker USD, triggered by statements about an imminent peace agreement, has prompted export companies to return their negotiation volumes to the forex market. This is easing the supply-demand imbalance caused by foreign remittances.

He added that if offshore short-sellers jumping on the weak USD trend join in, it could see a larger intraday drop. Woori Bank forecasts today's exchange rate to range between 1,506 and 1,519 KRW (about 0.99 to 1.00 USD).

Meanwhile, the domestic stock market is rallying as risk sentiment improves. The KOSPI surged nearly 8%, touching 8,373.32 during trading, while the KOSDAQ also saw gains of over 2%.

The USD-KRW exchange rate opened lower, driven by a renewed appetite for risk following ho …

USD-KRW Exchange Rate Drops: What Does It Mean for Asian Markets?