The South Korean Won (KRW) has come under significant pressure, with the USD/KRW exchange rate rising above 1530, according to DBS Group Research’s Chang Wei Liang [1]. The weakness in the KRW is attributed to a sharp pullback in semiconductor stocks, which fell 6% in early trading following a retreat in US semiconductor stocks led by an industry bellwether on Thursday [1]. This decline in chipmaker shares has heightened concerns about the stability of the Korean currency.
Foreign investor profit-taking is also cited as a key factor behind the KRW’s softness. After a substantial 93% rally in the KOSPI year-to-date, investors have begun to take profits, leading to capital outflows that are weighing on the currency [1]. DBS warns that further profit-taking could exacerbate the KRW’s vulnerability, especially as Korean exporters are not fully repatriating their overseas earnings [1].
Additionally, persistently high oil prices, which remain near USD100, are adding to the downward pressure on the KRW by increasing the country’s import costs and potentially widening the trade deficit [1]. The combination of these factors—semiconductor sector weakness, foreign outflows, limited exporter repatriation, and high oil prices—could destabilize the currency further if current trends persist [1].
CONCLUSION
The South Korean Won faces heightened risks due to a sharp decline in semiconductor stocks, ongoing foreign investor outflows, and elevated oil prices. Market participants should remain cautious, as further profit-taking and limited exporter repatriation could lead to additional KRW weakness.