KRW Gains Momentum on Strong Export Growth and Current-Account Surplus
The South Korean Won has been gaining strength against the US Dollar, driven by the country's strong export-led growth and large current-account surplus. Commerzbank analysts Charlie Lay and Dr. Henry Hao point to these factors as key drivers of the KRW's appreciation.
In recent months, increased hedging by the National Pension Service (NPS) and corporate repatriation flows have reduced financial-account offsets, allowing the country's external surplus to translate into a stronger currency. This has led to a sharp decline in the USD/KRW exchange rate, from around 1,560 at the end of June to 1,385 currently.
The Bank of Korea (BoK) is expected to continue tightening monetary policy, which will provide additional support for the KRW through the rates channel. However, further gains may become more gradual as the BoK has acknowledged that the stronger won is already tightening financial conditions.