Korean Won Strengthens to Near Two-Year High Against US Dollar
Key Takeaways
- •The won traded at 1,340.5 per dollar on Monday, its strongest close in nearly two years, after touching 1,334.7 intraday, the best level since October 4, 2024.
- •Exporter dollar selling, particularly by semiconductor firms including SK hynix converting US listing proceeds, was the main driver of the won's rally.
- •Foreign investors bought a net 2.5 trillion won ($1.86 billion) of Korean stocks, and the Kospi jumped 4.61 percent to close at 6,995.39.
- •The won rose despite solid US jobs data that boosted dollar-supportive rate expectations, showing export-linked flows can override US-driven dollar sentiment.
- •The currency pared gains after Yonhap Infomax reported the National Pension Service suspended its foreign exchange hedging operations, removing steady won demand.
The South Korean won climbed to its strongest level against the US dollar in nearly two years on Monday, extending a robust rebound built over recent weeks.
The currency was quoted at 1,340.5 won per dollar as of 3:30 p.m., up 9.9 won from the previous session's close. During morning trading, it advanced as far as 1,334.7 won per dollar, marking its strongest level since Oct. 4, 2024.
The rally has been driven largely by local exporters converting their dollar holdings into won, a routine practice in which shipbuilders, automakers and chipmakers repatriate overseas earnings, often around month-end and dividend dates, which tends to amplify won demand in concentrated bursts. Semiconductor companies have been among the most active sellers of dollars, and SK hynix has converted proceeds from a major US listing into the local currency.
Foreign investors added further support, purchasing a net 2.5 trillion won ($1.86 billion) worth of Korean stocks on Monday. The benchmark Kospi surged 4.61 percent to close at 6,995.39. Sustained foreign inflows are a closely watched driver of the won, as overseas buyers typically need to buy the local currency to settle stock purchases.
The won's advance came despite solid US jobs data, which raised expectations of higher US interest rates and lent support to the dollar. However, heavy dollar selling by Korean exporters outweighed the impact of the US figures. The episode highlights how, in Korea's heavily trade-oriented economy, flows tied to exports and institutional investors can at times override broader dollar sentiment driven by US economic data.
The currency lost some momentum later in the day after Yonhap Infomax reported that the National Pension Service had suspended its foreign exchange hedging operations. The National Pension Service, one of the world's largest pension funds, regularly hedges its vast overseas asset holdings by selling dollars for won, so any pause in that activity removes a steady source of won demand from the market.
Traders will be watching whether the exporter-driven dollar selling continues, how the National Pension Service's hedging stance evolves, and upcoming US rate signals for clues on whether the won can hold near the two-year high.
Source: Korea Herald
