Despite the massive current account surplus of Korea from the sale of semiconductors, the won has been weak for most of this YTD due to the selling of domestic equities from foreign financial entities. That has changed, however, as the won has appreciated sharply in July. A few factors contribute to this:
-Korea is hinted at having joint intervention with both Japan and US for the won (purchasing of won)
-Domestic expansion plans around semiconductors have incentivized inflows
-The recent downturn in the KOSPI has made Korean equities cheaper which also incentives inflows
-The Bank of Korea has raised interest rates which encourages holding of domestic assets
One thing not mentioned in this article is that the Federal Reserve did not raise interest rates. This will also likely support the won’s strength relative to the USD.
ixvst01 on
SK Hynix and Samsung are making lots of revenue in USD and aren’t converting to KRW. Thats a big explanation for how the Kospi has been able to rally so much year to date without the associated currency strengthening you’d expect.
JaceFlores on
I mean it’s in the name. I wouldn’t expect any less of the won to win
3 Comments
Despite the massive current account surplus of Korea from the sale of semiconductors, the won has been weak for most of this YTD due to the selling of domestic equities from foreign financial entities. That has changed, however, as the won has appreciated sharply in July. A few factors contribute to this:
-Korea is hinted at having joint intervention with both Japan and US for the won (purchasing of won)
-Domestic expansion plans around semiconductors have incentivized inflows
-The recent downturn in the KOSPI has made Korean equities cheaper which also incentives inflows
-The Bank of Korea has raised interest rates which encourages holding of domestic assets
One thing not mentioned in this article is that the Federal Reserve did not raise interest rates. This will also likely support the won’s strength relative to the USD.
SK Hynix and Samsung are making lots of revenue in USD and aren’t converting to KRW. Thats a big explanation for how the Kospi has been able to rally so much year to date without the associated currency strengthening you’d expect.
I mean it’s in the name. I wouldn’t expect any less of the won to win