SK Won Steady Ahead of US Inflation Data

Asian currencies consolidate against the dollar in the early session ahead of U.S. July CPI data due Tuesday. U.S. tariff revenue continues to increase every month and will erode profit margins if businesses don't raise selling prices, three members of CBA's Global Economic & Markets Research say in a research report. If the U.S. July core CPI is stronger than expected by economists, risks are that the greenback recoups some of its recent losses, the members add. USD/KRW is little changed at 1,389.20, USD/CNH is steady at 7.1891, and USD/SGD is flat at 1.2847, LSEG data show. (ronnie.harui@wsj.com)

The South Korean won edged down to around 1,386 per dollar on Friday, paring gains from earlier in the week amid lingering concerns about evolving US trade policy.

The move followed comments by US Commerce Secretary Howard Lutnick, who stated that semiconductor firms establishing domestic fabrication plants during President Trump’s term, subject to regulatory oversight, may qualify for exemption from the proposed 100% import tariff.

In a trade deal with Korea, the Trump administration granted Seoul most-favored-nation (MFN) status for semiconductors but did not specify tariff rates.

While the designation suggests preferential treatment, investor caution remains elevated due to vague implementation and compliance parameters.

The lack of specificity has left markets uncertain about the potential impact on Korean chipmakers’ exports to the US, especially against the backdrop of ongoing geopolitical and supply chain risks.

The South Korean won appreciated to around 1,383 per dollar on Thursday, recovering from recent losses as broad dollar weakness and strong domestic fundamentals supported sentiment.

South Korea posted a record current account surplus of $14.27 billion in June, up from $10.14 billion in May.

This marks the highest monthly surplus on record and the 26th consecutive surplus since May 2023.

However, the recovery was tempered by renewed trade policy uncertainty after US President Donald Trump proposed a 100% tariff on imported semiconductors under Section?232 of the Trade Expansion Act, citing national security concerns.

While this initiative could significantly impact the semiconductor sector, major South Korean chipmakers are expected to avoid the full tariffs.

Trump specified that firms that produce, or are in the process of producing, chips in the US would be exempt from the levy.

The South Korean won appreciated to around 1,384 per dollar on Monday, rising for the third consecutive session due largely to recent weakness in the dollar.

This came amid a weak US jobs report and President Donald Trump’s abrupt dismissal of Bureau of Labor Statistics Commissioner Erika McEntarfer, developments that unsettled investors and reinforced expectations of imminent Federal Reserve rate cuts.

On the domestic front, investor sentiment remained cautious as uncertainties lingered over unaddressed non-tariff barrier issues between South Korea and the US. While the recent tariff deal reduced tariffs on South Korean imports, key challenges persist, particularly regarding regulations in the digital sector, quarantine measures on agricultural products, and concerns related to foreign exchange and security.

Asian currencies mostly strengthen against the dollar amid prospects for Fed rate cuts that would reduce the appeal of U.S. fixed-income assets. The U.S. nonfarm payrolls report has raised questions over the labor market's strength and whether the Fed could be overestimating the U.S. economy's resilience, Commerzbank Research says in a note. Fed funds futures are pricing in 63 bps worth of rate cuts by year-end, up from 33 bps before the jobs report, the analysts note. USD/CNY falls 0.4% to 7.1847, USD/KRW drops 0.4% to 1,383.70, and USD/MYR slips 0.9% to 4.2350, LSEG data show. (ronnie.harui@wsj.com)

The South Korean won weakened to around 1,400 per dollar on Friday, hovering at over eleven-week lows amid pressure from US trade actions and domestic tax reform concerns.

The dollar held firm after President Trump reaffirmed a 10% baseline global tariff and up to 41% on non-trade partners, heightening trade tensions and prompting safe-haven flows into the greenback.

Domestically, sentiment was weighed by the government’s plan to roll back recent tax cuts, raising doubts over its commitment to market reforms and efforts to address the Korea Discount.

Meanwhile, July’s manufacturing PMI fell to 48.0 from 48.7 in June, marking a sixth straight month of contraction and signaling sharper deterioration in operating conditions as output and new orders declined.

Firms also cited growing uncertainty from the US tariff risks.

While exports rose a stronger-than-expected 5.9%, led by robust semiconductor demand, it was overshadowed by concerns over the broader industrial recovery.