Korean Won Hits 13-Month High as Semiconductor Boom Fuels Recovery

The Korean won has reached its highest level in 13 months, hitting 1,372.5 won against the US dollar. The Institute of International Finance (IIF) projects that the currency will recover to pre-COVID-19 pandemic levels due to significant domestic investment by semiconductor companies.

The IIF attributes this growth to Samsung Electronics' and SK Hynix's $583.3 billion investment in domestic semiconductor production facilities, as well as expanded conversion of export proceeds by these companies into won. This is expected to increase the current account surplus to 10% of GDP by next year.

The Bank of Korea's consecutive rate hikes have narrowed the interest rate gap with the US to 0.75 percentage points, further supporting the currency. Experts predict that the exchange rate could fall to the 1,360 won range by year-end and 1,310-1,390 won in the first half of next year.

Some analysts see potential for short-term rebounds driven by US monetary policy and dollar dip-buying. However, market sentiment favors downward pressure on the exchange rate prevailing over the medium to long term, with many predicting further declines.