USD/KRW eased from about 1,390 to 1,360 as local exporters sold dollars ahead of the Chuseok holiday, supporting the Korean won’s recent performance in Asian foreign exchange markets. Price action during the week was uneven, but flows tied to holiday-related dollar selling helped push the pair lower.
South Korea’s external trade backdrop remained firm. Early-September exports rose 78.3% year on year, driven by AI-related shipments, while imports increased 26.7%, pointing to faster inbound demand alongside the export rebound.
Korean Won Strength and Derivative Strategies
With the Korean Won showing impressive strength, we recommend that derivative traders position for further downside in the USD/KRW pair over the coming weeks. The recent drop from around 1,390 to 1,360 shows strong selling pressure on the Dollar, especially as local exporters convert their earnings. We suggest using short-dated put options on USD/KRW to capitalize on this downward momentum while limiting upfront risk.
Export Momentum and Trade Balance Outlook
This bullish outlook for the Won is backed by massive momentum in South Korea’s export sector, which recently saw early-September shipments skyrocket by 78.3% year-over-year. This surge is heavily supported by the global artificial intelligence boom, which continues to drive semiconductor shipments to historic highs. For context, South Korea’s chip exports hit a record-breaking $13.6 billion earlier this year, proving that the structural demand for the country’s technology goods is incredibly durable.
Even though domestic imports have accelerated by 26.7%, the country’s trade balance remains highly supportive of the local currency. Historically, during previous semiconductor upcycles, such as the one in 2020-2021, a sustained trade surplus has consistently dragged USD/KRW lower over a multi-month period. We expect this combination of seasonal exporter dollar-selling and strong structural inflows to push the currency pair toward the 1,340 level by mid-October.
To exploit this trend, we favor buying one-month USD/KRW put options with a strike price of 1,350. Alternatively, traders can set up bear put spreads to lower the cost of entry while still capturing the projected downward move. We should closely monitor the Bank of Korea’s upcoming policy meetings, as any hawkish hold on interest rates will likely accelerate the Won’s gains.
