Won Strength Spurs Yen, Dollar Buying
As the value of the won, which had been weak for a while, recently rebounds sharply, the atmosphere of ‘FX tech’ pursuing exchange gains is also spreading again. In particular, the buying trend for dollars and yen, which are considered global safe assets, is strengthening.According to the Seoul Fore
The South Korean won has recently shown signs of strengthening, buoying the value of the dollar and yen. According to data from the Seoul Foreign Exchange Market on September 3, the won-dollar exchange rate plunged to 1359.3 won by 3:30 PM, marking a decline of 9.4 won from the previous weekly closing price. This downward trend persisted for four consecutive trading days, starting from August 26.
However, the rate rose by 1.8 won on September 1 before falling again over the next two days. The lowest point of the won-dollar exchange rate during this period was recorded at 1355.9 won around 10:29 AM on September 3, marking the lowest level since July 3 of the previous year.
Despite mounting geopolitical tensions following the resumption of U.S. attacks on Iran, the won-dollar exchange rate has remained relatively stable, indicating that these factors alone have not substantially influenced the currency's value. The volume of dollar sales by export companies, particularly in the semiconductor industry, is believed to have contributed to the strong dollar, overwhelming other factors.
For instance, SK hynix sold approximately $26.5 billion in dollars by issuing American Depositary Receipts (ADRs) in the U.S. stock market last month.
Factors such as the decrease in foreign stock sales and the Bank of Korea's consecutive interest rate hikes are also considered significant in the won's strengthening trend. As a result, individuals are showing a willingness to invest in dollars and yen at lower prices. The dollar exchange volume surged to $349 million in July, the highest in six months since January, while the yen exchange volume increased more than twice to 37.6 billion yen compared to the same period last year (18.5 billion yen).
The Bank of Korea reported that the balance of dollar deposits at the end of July reached $108.92 billion, an increase of $11.12 billion from the previous month, marking the first time that domestic dollar deposits exceeded $100 billion since June 2012. Similarly, the balance of yen deposits at the five major banks stood at a total of 1.3456 trillion yen as of August 25, a 29.5% increase (306.8 billion yen) compared to the end of July.
Banks are actively promoting foreign exchange products to attract customers, such as Toss Bank's 'foreign currency piggy bank' and Woori Bank's QR code service for overseas payments. Securities firms forecast a period of strength for the won in the second half of the year, with LS Securities predicting an exchange rate range of 1,346 to 1,452 won.
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