USD/KRW falls below 1400 after policy shifts and a 0.6% Q2 GDP rise boost exporter confidence and capital inflows.
South Korea’s won has recovered from June lows, with USD/KRW dropping below 1400, driven by an AI-led export boom and stronger economic growth. Policy measures, including adjustments to National Pension Service hedging and FX liquidity access, helped stabilize the currency despite earlier $100bn in portfolio outflows this year.
The won’s weakness earlier peaked at USD/KRW 1560 in June, even as Korea maintained a large current account surplus. However, a 0.6% quarter-on-quarter GDP rise in Q2 and a 25bp Bank of Korea rate hike in July signaled broader economic strength, encouraging exporters to repatriate earnings.
ING notes the recovery reflects improved domestic investment conditions, though USD/KRW is unlikely to fall much further near-term. The turnaround offers a policy lesson for Japan amid similar currency pressures.