South Korean Won Drops to 17-Year Low

The South Korean won strengthened to around 1,425 per dollar, extending its July recovery, supported by strong foreign inflows and improving trade fundamentals. The currency continued to benefit from dollar inflows linked to SK Hynix's ADR offering, as proceeds from the transaction were converted into won for domestic semiconductor investment. Additionally, South Korea's external outlook improved, with July exports rising 62.9% year-on-year to $98.89 billion as semiconductor shipments surged 179%, lifting the trade surplus to $30.32 billion. This reinforced expectations for a recovery in growth amid robust chip demand. Meanwhile, renewed uncertainty over US-Iran negotiations kept geopolitical risks elevated and weighed on risk sentiment. Separately, softer-than-expected inflation eased concerns over domestic price pressures, though elevated core inflation limited expectations for a shift in the BOK's policy stance.

The South Korean won traded around 1,440 per dollar in late July and has gained more than 8% against the US dollar this month, marking its strongest monthly performance since March 2009. The appreciation followed reports of dollar-selling intervention by South Korean foreign exchange authorities. Officials also said Seoul and Tokyo were maintaining close coordination amid recent currency moves, noting that continued dollar supply in the domestic market could provide further support for the won. Global risk sentiment improved following a rebound in technology stocks, reducing demand for the greenback. Stronger foreign investor activity in South Korean equities boosted currency flows, while expectations of continued AI-led semiconductor export growth reinforced Korea's external position.

The South Korean won strengthened to around 1,435 per dollar in late July, extending gains to its strongest level since late February, as increased dollar supply from exporters and corporate currency conversions supported the currency. SK hynix's repatriation of proceeds from its US listing, along with month-end exporter settlements, helped offset dollar demand from foreign investors selling South Korean equities during the recent stock market rout. The won also benefited from improving export sentiment, with record semiconductor earnings and sustained AI-related memory demand reinforcing expectations for continued strength in South Korea's key export sector and sustained foreign currency inflows. Separately, the Federal Reserve's decision to keep interest rates unchanged eased concerns over a near-term rate hike, weakening the dollar and reducing pressure on the won. Meanwhile, renewed US-Iran tensions and potential oil price volatility remained risks for the currency.