SerpApi.Org
The won has finally found its footing after two months at crisis-era lows, in a dramatic turnaround that marks a decisive shift in market sentiment. It has strengthened more than 5 percent from levels near 1,560 per dollar at the start of this month, becoming one of Asia's best-performing currencies in July.
The won's July surge was driven largely by SK hynix's $26.5 billion Nasdaq listing, which flooded the market with dollars. Analysts expect the gains to hold through year-end, pointing to chip-led export strength, a narrower rate gap with the United States and slowing capital outflows.
The won's recent strength reflects domestic tail winds more than a broad weakening of the dollar. But looming drags — from Korean retail investors' appetite for overseas assets to massive investments in the United States under a bilateral trade deal and geopolitical risks in the Middle East — are likely to limit further appreciation.
After hovering above the psychologically important 1,500-per-dollar mark for more than a month, the won finally traded below the level at its intraday low on July 8. It has since extended its gains, trading at 1,466.8 per dollar as of 3:30 p.m. Thursday.
KB Securities forecasts the won to strengthen to the mid-1,400s against the greenback by year-end, with 1,480 won serving as a key support level, while Hanwha Investment & Securities projects the currency to trade between 1,430 and 1,550 in the second half.
A structural ceiling
Despite multiple factors supporting the won, structural capital outflows are likely to cap its appreciation, making a return to the levels seen just a few years ago unlikely, when the exchange rate averaged 1,180 won per dollar in 2020.
“The won’s level divides into before and after the Covid-19 pandemic, during which foreign investment among retail investors surged,” said Kim Byung-yeon, director at NH Investment & Securities’ investment strategy department, in a press briefing on Monday.
“If exports were at this level in the past, it wouldn’t be strange for the won to move to as low as 1,200 per dollar,” he added. “But since the pandemic, the exchange rate has shifted higher, as outbound investment and the financial account now play a much bigger role. It will be difficult for the won to strengthen sharply from here given that trend,” Kim added.
Residents in Korea net purchased 12.84 billion dollars of U.S. securities so far this year, continuing the upward trajectory from 32.46 billion dollars in 2025 and 10.55 billion dollars in 2024, according to data from Korea Securities Depository.
Korea's pledge to invest $350 billion in the United States last year in exchange for lower U.S. tariffs on Korean goods is another structural factor likely to continuously drive capital outflows.
"As supply chains and investment increasingly shift to the United States under a global economic realignment that began to take shape during the Biden administration, the dollar has gained structural support," said Park Seok-hyun, the deputy head of the wealth management products division at Woori Bank. "That's a structural shift that is unlikely to reverse anytime soon."
Domestic strength defies the dollar
Some analysts say the turnaround in sentiment has been driven largely by domestic factors, as the dollar remains strong amid global uncertainty stemming from the prolonged conflict in the Middle East and the risk of Federal Reserve tightening.
"Domestic factors appear to have been the main drivers of the won's recent strength, with SK hynix's [$26.5 billion] Nasdaq listing — [larger than the $19.87 billion currency swap line Korea secured from the Federal Reserve in 2020] — acting as the primary catalyst," said Oh Jae-young, an analyst at KB Securities.
She said the Japanese yen, which had previously moved closely in tandem with the won, has failed to strengthen alongside the Korean currency, suggesting the won's recent gains have been driven primarily by domestic factors. On Wednesday, the yen weakened beyond 163 per dollar to its lowest level in 40 years.
The dollar's strength is reflected in the U.S. Dollar Index, which measures the greenback against a basket of six major currencies. The index was above 101 on Thursday, underscoring the dollar's strength.
Analysts also point to Korea's resilient economy, highlighted by stronger-than-expected second-quarter growth. Advance data released by the Bank of Korea on Thursday showed GDP expanded 0.6 percent in the second quarter from the previous quarter. The reading puts the economy on track to grow at least 3 percent this year.
The slowdown in foreign investors' net selling has also supported the won.
Foreign investors unloaded a net 156 trillion won worth of Kospi-listed stocks through Thursday this year, according to Korea Exchange data. However, the pace of selling has slowed since the second week of July, with overseas investors turning net buyers for a fourth consecutive session through Thursday. On Thursday alone, they made net purchases of 2.14 trillion won.
BY JIN MIN-JI [[email protected]]
