South Korean Won Eases From Near 2-Year High

The South Korean won traded around 1,346 per dollar, easing slightly but remaining near a two-year high, as surging oil prices lifted demand for the US dollar. Brent crude climbed above $107 per barrel amid escalating US-Iran tensions, raising concerns over higher energy import costs. Additionally, the US 10-year Treasury yield approached 5% as markets raised bets on a Fed rate hike next week following stronger US producer inflation, keeping the dollar elevated ahead of the US CPI report. At the same time, South Korea’s inflation remained above the BOK’s target, with consumer prices rising 3.1% year-on-year in August, while the central bank indicated that the timing and pace of further rate hikes will depend on domestic and external conditions. Meanwhile, exports surged 82.9% year-on-year in the first 10 days of September, with semiconductor shipments jumping 270%, highlighting the strength of Korea’s external trade.

The South Korean won traded around 1,339 per dollar, approaching its strongest level since early October 2024, as strong export earnings fueled exporter dollar selling. South Korea’s cumulative exports reached a record $709.4 billion so far this year, already surpassing the 2025 annual record, with semiconductor exports rising 169.6% in January-August amid strong demand for AI-related chips. The won has strengthened by roughly 250 won from its July low, underscoring its sharp recovery. Meanwhile, escalating US-Iran tensions pushed Brent crude above $100 a barrel, raising concerns over inflation and increasing dollar demand from importers. The US 10-year Treasury yield also climbed to its highest level since November 2023, while markets priced in about a 60% probability of a September Federal Reserve rate hike, limiting the won's gains. Separately, investors awaited US producer-price data and consumer inflation data this week for further clues on the Fed’s policy path.

The South Korean won traded around 1,352 per dollar, extending gains to its strongest level since June 2025, as easing expectations for another US rate hike weakened the dollar and lowered Treasury yields. Fed Governor Christopher Waller indicated support for keeping rates steady if inflation continues to cool, prompting markets to reduce the probability of a September hike to around 50% from 63% previously. The 10-year Treasury yield fell after reaching its highest level since November 2023. Additionally, South Korea posted a strong external balance, with the current account recording a $42.08 billion surplus in July, the second-largest monthly surplus on record and the largest ever recorded for July, with semiconductor-led goods exports remaining robust. However, renewed US plans for targeted semiconductor tariffs linked to companies’ domestic production could weigh on the currency outlook, given the importance of chip exports to Korea’s trade balance.