The aftermath of the Middle East war has caused the Korean Won/US Dollar correlation to surge, increasing market uncertainty.

Following the recent outbreak of war in the Middle East, the correlation between the US dollar and the Korean won has significantly increased. This phenomenon stems from heightened exchange rate volatility caused by international economic instability.

According to data from Infomax, over the past month, the correlation coefficient between the USD/KRW exchange rate and the US dollar index has reached 0.84. The correlation coefficient measures the degree of co-movement between two indicators; the closer to 1, the more they tend to move in the same direction. In other words, the Korean won and the US dollar are currently showing a close linkage.

However, this synchronized trend was different at the end of last year. Despite a weakening US dollar index, the USD/KRW exchange rate rose against the trend due to domestic supply and demand factors, resulting in a low correlation. At that time, the correlation coefficient between USD/KRW and the dollar index was -0.79, indicating inverse movement.

Since the outbreak of the Middle East conflict, the USD/KRW exchange rate has followed the US dollar’s strength sharply upward, and recently, this correlation coefficient has risen again. Especially on a weekly basis, the correlation increased from 0.22 at the end of last month to over 0.95, more than quadrupling. This is interpreted as a reflection of market uncertainty during the early stages of the war.

Such fluctuations in exchange rate correlation may be influenced by multiple economic factors, including international oil prices, raw material costs, and economic policy adjustments. It is expected that as market conditions change, the volatility and correlation between the Korean won and the US dollar may shift again. Economic experts emphasize the need for continuous monitoring and the development of contingency plans.