South Korean Won: Export surge supports BoK stance – Commerzbank

Commerzbank reported that South Korea's exports surged 78.3% year-on-year in the first 20 days of September, showcasing nine months of double-digit growth. This impressive increase was driven by a significant 259% rise in semiconductor exports. The Bank of Korea (BoK) is confident in this robust growth, and it is expected to maintain its policy rate at 3.0% during the October 22 meeting, despite a hawkish stance.

South Korea's exports in September rose by 78.3% compared to 56.0% in August, marking a record high and extending the ninth consecutive month of double-digit growth. This strong export data validates the BoK's positive outlook on the nation's economic growth, as the Monetary Policy Committee showed confidence that the economy could withstand further monetary tightening to control inflation.

The recent stability of the South Korean Won (KRW) suggests that further rate hikes might not be needed in the near term, allowing policymakers more time to analyze the effects of past tightening on economic activity. In foreign exchange markets, USD/KRW fell 1.1% to 1,371, marking the first decline in six sessions, likely due to lower global crude oil prices and exporter dollar selling ahead of the Chuseok holiday on September 25.

The BoK also tested 24-hour KRW settlement, involving four local banks, which is a significant step in KRW market liberalization efforts aimed at attracting foreign investors. This progress is crucial for South Korea's potential reclassification to developed market status, as MSCI previously identified restrictions in the KRW market as a key constraint.