South Korean won strengthens nearly 140 won against U.S. dollar

Park Sang-hyun says July U.S. CPI report next test for won

South Korea’s won closed at 1,418.4 per dollar at 3:30 p.m. Sunday, down nearly 140 won from an intraday level of 1,555.8 on July 2, according to Asia Today, as translated by United Press International. The exchange rate has moved away from the 1,600-level, raising the prospect of a return to the 1,300-won range.

The shift has been driven by expectations of increased dollar supply tied to SK hynix’s U.S. depositary receipt listing, an easing of portfolio rebalancing by foreign investors, strong semiconductor exports and record current-account surpluses, the report said.

Expectations surrounding SK hynix emerged as a major turning point after its U.S. depositary receipts were listed July 10. The chipmaker raised about $26.5 billion through the listing, prompting expectations that some of the proceeds would flow into South Korea and be converted into won.

Dollar sales by South Korean exporters have also added to the shift in supply and demand in the foreign exchange market. The easing of portfolio rebalancing by foreign investors has been another factor: as South Korean stocks rose sharply during the first half of the year, foreign investors reduced their Korean equity exposure and converted won proceeds into dollars, putting upward pressure on the exchange rate. That activity has recently weakened, according to the report.

South Korea’s external accounts have also supported the won. The country’s current-account surplus reached a record $49.73 billion in June, following the previous record of $38.61 billion in May, according to the Bank of Korea. Strong semiconductor exports driven by expanding AI investment have substantially increased dollar inflows into South Korea.

The next major test for the exchange rate will be the U.S. consumer price index for July, scheduled for release Wednesday. With recent U.S. employment data weakening expectations for a September rate increase, inflation figures in line with market forecasts could reinforce expectations that the Federal Reserve will keep rates unchanged, potentially adding downward pressure on the dollar, the report said.

Park Sang-hyun, a researcher at iM Securities, said that if inflation matches market expectations, the case for the Federal Reserve to hold rates steady in September would gain further momentum, creating additional downward pressure on the dollar. He noted the inflation report could shape whether the won breaks into the 1,300 range, while saying the exchange rate is more likely to hover around 1,400 in the near term rather than decline sharply.