South Korean Won Rises to Over 5-Month High

The South Korean won strengthened to around 1,444 per dollar in late July, reaching its highest level since late February, supported by expectations for tighter monetary policy and improved domestic fundamentals. The Bank of Korea reiterated that maintaining a tightening stance remains necessary amid persistent inflation pressures, following its recent rate hike to 2.75%, while highlighting stronger exports and investment as factors supporting continued economic growth. The currency also received support from SK hynix converting proceeds from its US listing into won, boosting demand for the local currency despite foreign investors selling South Korean equities. Meanwhile, gains were limited by uncertainty surrounding the Federal Reserve's policy outlook, with markets still weighing the possibility of higher US interest rates. Volatility in the global semiconductor market also continued to influence broader risk sentiment.

The South Korean won traded around 1,465 per dollar in late July, retreating from an over-two-month high as investors adopted a more cautious stance ahead of this week's Federal Reserve policy decision. The currency's pullback came as markets awaited further guidance on the US interest rate outlook, with uncertainty over the timing of future policy moves lending some strength to the dollar. At the same time, renewed risk aversion amid a sharp semiconductor selloff and foreign equity outflows further limited gains, with overseas investors selling KRW 2.1 trillion worth of shares. Meanwhile, the won remained underpinned by improved external conditions, as a pause in US-Iran strikes eased geopolitical concerns, pushed oil prices lower, and improved risk sentiment. Exporter dollar selling also helped sustain the currency, with SK hynix's record US listing earlier this month prompting dollar conversions that contributed to broader corporate repatriation flows.

The South Korean won strengthened to around 1,460 per dollar, reaching its highest level since early May, as stronger domestic growth prospects supported the currency. South Korea's economy expanded 0.6% in the second quarter, beating the Bank of Korea's 0.2% forecast, with robust exports, particularly semiconductors, and resilient private consumption helping offset lingering weakness in construction activity. The won was also supported by sustained foreign investor demand for Korean assets, with overseas investors returning to local equities as the KOSPI recovered, while improving sentiment toward the country's technology sector and export outlook supported capital inflows. Meanwhile, renewed Middle East tensions and a surge in oil prices posed downside risks, with escalating concerns over the US-Iran conflict and potential disruptions to energy supplies prompting caution in global markets.