Commerzbank reports that the South Korean Won (KRW) has been bolstered by significant foreign portfolio inflows and exporters' repatriation activity, leading to a notable appreciation against the US Dollar. The Kospi, South Korea's equity benchmark, has rebounded by 29.5% from its 30 July low, driven by strong earnings in the technology sector and improved sentiment toward semiconductor and memory chipmakers. This positive momentum in equities has encouraged foreign investors to re-enter the market, with net purchases of USD1.9 billion in South Korean equities since 30 July [1].
The USD/KRW exchange rate has retreated nearly 8.9% from its July high of 1,559, despite a modest 0.3% rise to 1,421 yesterday due to a stronger US Dollar. Year-to-date, the KRW is up 1.5% versus the USD, making it the second-strongest Asian currency this year and outperforming the regional ex-Japan average of -2.1% [1].
Commerzbank highlights that the combination of recovering semiconductor sentiment and easing volatility in the Kospi has been instrumental in attracting foreign capital. The bank suggests that further moderation in equity market volatility could support additional portfolio inflows and provide near-term support for the KRW [1].
The Kospi's recent performance includes a 3.6% gain yesterday, following a 3.7% rally the previous day, underscoring the strong market response to robust tech sector earnings and renewed investor confidence [1].
CONCLUSION
The South Korean Won has outperformed regional peers, supported by strong foreign inflows and a tech-driven rally in the Kospi. Market sentiment remains positive, with further moderation in volatility likely to attract additional investment and provide continued support for the KRW in the near term.