South Korean Won strengthens as dollar supply increases

The KRW/USD exchange rate has trended downward, recently hitting the 1,380 won range, marking its lowest level in approximately 11 months. Analysts suggest the rate could potentially reach the 1,350 won level due to increased dollar supply in the foreign exchange market.

Key drivers for this strengthening won include a significant trade surplus and corporate demand for currency conversion. Notably, SK hynix’s announcement of a 40 trillion won shareholder return policy is expected to increase dollar selling pressure as the company converts holdings into won. Other factors include semiconductor companies' currency needs, tax prepayment demands, and government investment funding.

While rising U.S. long-term treasury yields and oil prices have exerted upward pressure on the dollar, consistent dollar selling by exporters has maintained the downward trend. The weakening dollar may reduce the burden for individual investors seeking overseas stocks and could improve the outlook for foreign investment in domestic Korean assets.