South Korean Won: Foreign inflows and exporters support KRW – Commerzbank

Commerzbank notes that the Kospi has rebounded 29.5% from its 30 July low, supported by strong tech earnings and improved sentiment toward semiconductor and memory chipmakers. They note USD/KRW has retreated nearly 8.9% from its July high as exporters’ repatriation and foreign portfolio inflows bolster the Korean Won. Despite a modest 0.3% rise to 1,421 on a stronger Dollar, KRW is the second-strongest Asian currency this year, up 1.5% versus USD and outperforming the regional ex-Japan average of -2.1%. Further volatility moderation in equities may offer near-term KRW support.

USD/KRW retreats from July peak

“The South Korean equity benchmark Kospi rose 3.6% yesterday, following a 3.7% rally on Wednesday. The index has now rebounded by 29.5% from its 30 July low. The recovery was driven by strong tech earnings, which boosted market sentiment toward semiconductor names and lifted South Korean chipmakers.”

“This combination of recovering semiconductor sentiment and easing Kospi volatility has enticed foreign investors to re-enter the market. Since 30 July, foreign investors have net bought USD1.9bn of South Korean equities. A further moderation in volatility could support additional portfolio inflows and provide near-term support for the KRW.”

“USD/KRW rose 0.3% to 1,421 yesterday, driven by a stronger USD. Nonetheless, the pair has fallen by nearly 8.9% from its July high of 1,559, as exporters’ repatriation activity and foreign portfolio inflows continue to support the KRW.”

“Year-to-date, KRW is up 1.5% vs the USD, well above the average for Asian currencies ex-Japan of -2.1%.”

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