South Korea’s Kospi has rebounded 29.5% from its 30 July low after rising 3.6% yesterday and 3.7% on Wednesday, helped by strong tech earnings and improved sentiment towards semiconductor and memory chipmakers. Since 30 July, foreign accounts have been net buyers of USD1.9bn in South Korean equities, alongside easing equity volatility. These flows have coincided with exporters’ repatriation activity, supporting the Korean won.
USD/KRW rose 0.3% to 1,421 on a stronger US dollar, yet the pair has fallen by nearly 8.9% from its July high of 1,559. On a year-to-date basis, the won is up 1.5% against the US dollar, making it the second-strongest Asian currency, while the Asian ex-Japan average stands at -2.1%. Further moderation in equity volatility could underpin additional portfolio inflows and provide near-term support for KRW.
Strategies for Won Strength and FX Positioning
We recommend that derivative traders position for further downside in USD/KRW by purchasing put options or establishing short futures positions. With the exchange rate falling nearly 8.9% from its July peak of 1,559 down to 1,421, the South Korean Won is showing remarkable resilience as the second-strongest Asian currency this year. This downward trend is highly likely to continue as exporter repatriation and foreign capital inflows keep defending the local currency.
This bullish sentiment for the Won is backed by South Korea’s stellar export performance, particularly in the semiconductor sector which saw chip exports surge by over 50% year-on-year in recent months due to global AI demand. Historically, heavy foreign buying of local tech giants like Samsung Electronics and SK Hynix has always preceded prolonged periods of Won strength. As foreign investors injected USD 1.9 billion into Korean equities since late July, we expect this tech-driven momentum to keep pushing USD/KRW lower in the coming weeks.
Kospi 200 and Risk Management Approaches
Traders should also target the Kospi 200 index by buying call options or going long on futures to exploit the easing market volatility. The benchmark index has already staged a massive 29.5% recovery from its July 30 low, heavily supported by blockbuster tech earnings. If volatility measures continue to cool down as expected, we anticipate a steady stream of foreign portfolio inflows that will sustain this upward equity momentum.
To protect these positions, we must closely monitor the Bank of Korea’s upcoming policy decisions, especially as they balance a restrictive 3.5% base rate against cooling inflation. Any sudden shifts in global risk appetite could trigger short-term spikes in USD/KRW, making tight stop-losses on short USD positions essential. However, the underlying structural demand for Korean high-bandwidth memory chips suggests that any currency dips should be treated as buying opportunities for the Won.
