Key Moments
- USD/KRW trades near 1,510.00 after hitting a 17-year high of 1,516.76 on Monday.
- Foreign investors withdrew 1.8 trillion Won amid heightened risk aversion, putting pressure on the South Korean Won.
- Markets are pricing in an 85.5% chance that the Federal Reserve will keep rates unchanged at its April meeting.
USD/KRW Pullback After Fresh 17-Year High
USD/KRW is around 1,510.00 during European trading. It eased slightly after reaching a 17-year high of 1,516.76 on Monday. The move follows worsening risk sentiment, which triggered foreign outflows totaling 1.8 trillion Won. This weighed heavily on the South Korean Won (KRW).
Oil Supply Strains Add Pressure on KRW
The KRW faces further pressure after Saudi Aramco cut crude exports to Asia for the second consecutive month in April. The reduction comes amid tensions involving the US, Israel, and Iran, which disrupt traffic through the Strait of Hormuz.
Supply is concentrated in Arab Light crude leaving from the Red Sea port of Yanbu. This limits volumes for Asian refiners and reduces their output. Since South Korea imports over 90% of its oil, the currency is highly exposed to Middle East supply disruptions.
Stronger US Dollar Supports USD/KRW
The USD/KRW pair is also supported by a firmer US Dollar (USD). Investors are increasing allocations to safe-haven assets amid Middle East tensions. Rising oil prices are amplifying inflation concerns and sustaining the Federal Reserve’s hawkish tone. Consequently, markets are factoring in a possible Fed rate hike later this year, boosting demand for the Greenback.
Federal Reserve Policy Outlook
At its March meeting, the Federal Reserve voted 11-1 to keep the federal funds rate steady in the 3.50%-3.75% range. This marked a second consecutive pause after rate cuts in late 2025. Derivatives pricing in the CME FedWatch tool shows an 85.5% probability of no change at the April meeting.
| Event / Metric | Detail |
|---|---|
| USD/KRW intraday high (Monday) | 1,516.76 (17-year high) |
| Current USD/KRW level (European hours) | Around 1,510.00 |
| Foreign outflows from South Korea | 1.8 trillion Won |
| South Korea oil import dependence | Over 90% of oil needs |
| Fed funds target range (March decision) | 3.50%-3.75% |
| FOMC March vote | 11-1 to keep rates unchanged |
| April Fed meeting hold probability | 85.5% (CME FedWatch) |
Understanding Risk Sentiment
Market sentiment affects asset prices and currencies. Investors adjust positions depending on whether they feel “risk-on” or “risk-off.” This drives demand for safe-haven or growth-oriented assets.
Risk Sentiment FAQs
What do “risk-on” and “risk-off” mean?
“Risk-on” markets show investor optimism, leading to more buying of higher-risk assets. “Risk-off” markets occur when investors are cautious. They favor safer assets, even if returns are smaller.
Which assets indicate risk sentiment?
In “risk-on” periods, stocks and most commodities rise, except for gold. Commodity-exporting countries’ currencies often strengthen. Cryptocurrencies also tend to gain. In “risk-off” periods, bonds, gold, and safe-haven currencies such as the USD, JPY, and CHF benefit.
Which currencies gain in “risk-on” markets?
The AUD, CAD, NZD, and some minor currencies like RUB and ZAR rise. These economies rely heavily on commodity exports, which benefit from increased demand in optimistic markets.
Which currencies gain in “risk-off” markets?
The USD, JPY, and CHF strengthen. The USD benefits from global demand for safe assets. The JPY rises due to domestic bond demand. The CHF is supported by strict Swiss banking laws that protect capital.
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