South Korean Won Retreats from Over 2-Year High

The South Korean won strengthened to around 1,336 per dollar, recovering from two-week lows as broad-based gains in Asian currencies and a weaker US dollar lifted the currency. The won led regional peers higher after the Federal Reserve held interest rates at 3.75–4.00%, with fewer-than-expected dissenting votes favoring a hike prompting some investors to interpret the decision as modestly dovish. Meanwhile, South Korea’s business sentiment improved, with the Bank of Korea’s Composite Business Sentiment Index rising 5.1 points to 104.2 in October, its highest level since August 2022. Improved manufacturing and non-manufacturing confidence reflected stronger investment and production in semiconductors, automobiles, and shipbuilding, while the won’s appreciation eased local firms’ costs for imported raw materials. However, elevated oil prices, with Brent crude trading near $115 a barrel, continued to pose risks for the energy-importing economy.

The South Korean won fell to around 1,339 per dollar, retreating from over two-year highs as renewed overnight dollar strength and caution ahead of the Federal Reserve’s interest rate decision outweighed support from semiconductor exporters’ dollar sales. The dollar index hovered near a two-week high of 102.37 as investors awaited signals on the future path of US monetary policy amid persistent inflation concerns and Middle East tensions. The won also faced pressure from demand for dollars from local retail investors investing in US stocks, while rising foreign currency deposits, which reached a record $154.7 billion in September, highlighted continued accumulation of foreign currency holdings by residents. However, dollar sales by exporters and foreign inflows into local equities continued to provide some support for the currency.

The South Korean won traded around 1,324 per dollar, extending gains to its strongest level since October 2024, as month-end dollar selling by exporters and offshore investors increased greenback supply. Recent remarks by Bank of Korea Governor Shin Hyun-song highlighting strong export-driven dollar inflows and the won’s undervaluation also reinforced expectations for further currency gains. Meanwhile, South Korea’s GDP expanded 1% quarter-on-quarter in the third quarter, accelerating from 0.6% in the previous quarter and exceeding market expectations of 0.8%, providing additional fundamental support. However, elevated oil prices amid continued Middle East tensions remain a risk, as higher energy import costs could increase demand for dollars. Investors also awaited the Federal Reserve’s policy decision on October 27–28 for further clues on the US interest rate outlook.