Asian equity markets have shown strength, with semiconductor-focused indices in South Korea and Taiwan outperforming. This comes as market attention remains on companies linked to AI, and Asian exporters have been doing well.
Early February export data from South Korea was strong. Alongside measures aimed at bringing export-related foreign currency earnings back onshore, this has supported expectations for a firmer won.
Won Strength Supported By Exports
ING forecasts USD/KRW may fall to 1425 by the end of March. The move is linked to export performance and policy steps designed to encourage capital and FX earnings to return domestically.
US equities have remained rangebound, with the S&P 500 moving between 6775 and 7000 since the start of the year. Nvidia’s upcoming results are noted as a potential near-term market focus.
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Looking back at the analysis from early 2025, the conviction was that the AI-driven semiconductor boom would power Korean markets and the won. This was supported by strong export data at the time, a trend which has largely continued into this year. For instance, semiconductor exports have maintained double-digit year-over-year growth through most of the past twelve months, confirming the underlying strength we saw.
Derivative Positioning For A Stronger Won
That forecast called for USD/KRW to fall to 1425, and with the pair currently trading around 1395, the directional call for a stronger won was correct. The primary drivers remain in place, with Korean corporate governance reforms, known as the “Corporate Value-up Program,” also encouraging capital to stay onshore. Given this momentum, the path of least resistance for the currency pair appears to be lower.
For derivative traders, this outlook suggests positioning for further declines in the USD/KRW exchange rate. This can be done by purchasing put options on the pair, which profit as the rate falls below a certain strike price. Alternatively, a bearish put spread could be used to lower the upfront cost of the trade while still benefiting from a moderately stronger won.
This strategy is underpinned by the sustained global demand for AI-related technology, which directly benefits major Korean exporters. We’ve seen the KOSPI index gain over 7% since the beginning of this year, validating the positive sentiment surrounding the equity market. This persistent strength should continue to support the won against the dollar in the weeks ahead.
However, traders should remain aware of potential volatility stemming from external factors, like upcoming U.S. inflation data. Buying options provides a defined-risk way to participate in the expected won appreciation while protecting against any sudden reversal. The current low implied volatility in the pair, which has hovered around 7-8%, makes option premiums relatively inexpensive to hedge or speculate.
