The South Korean won (KRW) has emerged as the best performing Asian currency this week, according to Chang Wei Liang at DBS Group Research, driven by robust demand for semiconductors and reported foreign exchange (FX) intervention coordination between South Korea, the United States, and Japan [1]. Despite recent volatility in Korean semiconductor equity markets, physical demand for memory chips remains strong, pushing memory prices to new highs [1]. The surge in AI-related semiconductor demand is fueling a significant terms-of-trade boom for the Korean economy, with the KRW only beginning to reflect these benefits [1].
DBS notes that Korean authorities have reportedly coordinated with the US and Japan in FX market interventions to support the KRW, although these actions are not as large in scale or impact as recent Japanese yen interventions [1]. The potential for further joint interventions, possibly encouraged by the US Treasury, underpins DBS’s recommendation to maintain a short position on USD/KRW [1].
The combination of strong semiconductor fundamentals and intervention risks is seen as reinforcing support for the KRW, despite ongoing equity market corrections in Korean chip stocks [1].
CONCLUSION
The South Korean won is benefiting from strong semiconductor demand and coordinated FX intervention efforts, making it the top performing Asian currency this week. Market participants are advised to remain cautious of further intervention risks, which continue to support the KRW against the US dollar.