The South Korean won rebounded Tuesday from its five-year low against the greenback on eased inter-Korean tensions and high expectations of a delay in a much-expected U.S. rate hike.

The local currency was quoted at 1,194.55 to the greenback as of 1:50 p.m., up 4.45 won from the previous session's close.

"The two Koreas' breakthrough deal to ease tensions, coupled with concerns over the currency authorities' potential intervention, is helping the Korean won recoup some of its losses," said Jun Seung-ji, an analyst at Samsung Futures Co. The analyst, however, said the won's decline may be limited as concerns over a slowdown in the Chinese economy persist.

The won has been under selling pressure over the past few weeks due to worries over China's economic slowdown, coupled with the ongoing tension on the peninsula, which has triggered massive capital outflows from emerging markets.

China's yuan devaluations have jolted the global financial market with bets on risky assets sharply tumbling amid concerns over a slowdown in the global economy.

Earlier in the day, the two Koreas reached an agreement on defusing heightened tensions in a dramatic breakthrough after days of intensive high-level talks.

North Korea expressed regret over its land mine attack and promised to make efforts toward ending provocations.

The won-yen arbitrated rate stood at 999.37 won per 100 yen as of 1:50 p.m., after surpassing the 1,000-won level in the morning session for the first time since Oct. 17, 2014, as the local currency tumbled amid concerns over a slowdown in China and global economic uncertainties.

In contrast, the Japanese currency gathered ground, emerging as a safe haven investment vehicle.

The rate has been hovering below the psychologically important barrier since last year as the yen continued to remain weak against the greenback on the back of Japanese Prime Minister Shinzo Abe's campaign, dubbed Abenomics, to end years of deflation and listless growth through massive fiscal and monetary policy easing measures.

In contrast, the won has remained relatively strong against the greenback as foreign investors snatched up a huge chunk of local stocks. (Yonhap)