South Korean Won Hits 35-week Low

The South Korean won slipped to around 1,472 per dollar, approaching seven-month lows, as persistent capital outflows were driven by domestic investors increasing overseas equity holdings.

The currency has fallen roughly 5% against the dollar this quarter, approaching a 16-year low, highlighting ongoing pressures on the FX market.

Investor caution heightened as import prices rose at the fastest pace in 19 months in November by 2.6% month-on-month, up from 1.9% in October, reflecting the impact of the weaker won on import costs.

Amid these conditions, Kim Jong-hwa, a central bank board member, warned that exporters without adequate currency hedges and smaller businesses unable to pass on higher import costs face significant challenges.

Separately, concern was tempered as the Ministry of Economy and Finance reported a recovering economy, with the monthly Green Book noting three months of improvement in consumption and exports.

The South Korean won steadied to around 1,470 per dollar, attempting to recover from multi-month lows after the Finance Ministry announced that it is forming a dedicated task force under its international finance bureau to address sustained currency weakness.

The group is expected to track exporters’ currency conversions and overseas investments, review incentives for faster dollar repatriation, adjust tax exemptions on foreign dividends, and tighten oversight of brokerage firms amid concerns over leveraged offshore products.

The initiative comes as the won has stayed below 1,450 per dollar, pressured by domestic outbound investment and foreign profit-taking.

Separately, investor sentiment was tempered as markets awaited the outcome of the US Federal Reserve’s two-day policy meeting, with caution rising over whether the central bank would implement the widely expected 25-basis-point rate cut.

The South Korean won strengthened to around 1,467 per dollar on Monday, recovering from multi-month lows as sentiment was bolstered by recent domestic developments.

Finance Minister Koo Yun-cheol highlighted that, following the budget’s approval, government ministries are initiating measures to reinforce economic growth.

Last week, the National Assembly ratified the 2026 government budget at KRW 727.9 trillion, directing increased spending to stimulate economic activity and bolster national defense.

Investor sentiment was further supported as South Korean and Japanese business lobbies issued a joint statement pledging closer cooperation in artificial intelligence, semiconductors, and other shared structural priorities.

Separately, investors positioned ahead of the Federal Reserve’s two-day policy meeting this week, with markets largely anticipating a 0.25 percentage point cut in the 3.75%–4.0% funds rate.

The South Korean won slipped toward 1,470 per dollar, hovering near seven-month lows as market sentiment remained pressured by ongoing capital outflows despite strong economic growth data.

Bank of Korea data showed the economy grew at its fastest pace in nearly four years in Q3, with real GDP rising 1.3% quarter-on-quarter and 1.8% year-on-year.

Nevertheless, the currency has fallen more than 4% against the dollar this quarter, with the central bank citing rising overseas investments by domestic residents and foreign selling of Korean stocks as key factors.

Lee Chan-jin, governor of the Financial Supervisory Service, said authorities would review whether financial firms are adequately explaining foreign exchange hedging risks for overseas investments.

While government measures to strengthen consumer protection helped ease some investor caution, the absence of active steps to support the currency has left the won exposed.

The South Korean won weakened to around 1,470 per dollar on Monday, staying near its lowest level in over seven months amid persistent foreign equity outflows and firm corporate demand for US dollars.

Offshore investors recorded their largest monthly net selling on Korean shares in November, reversing two months of buying and reinforcing steady capital outflows from domestic markets.

Companies also accelerated their accumulation of dollar deposits, marking the fastest monthly increase this year as firms hedged against FX volatility and expanded overseas commitments.

On the economic front, sentiment softened following another month of manufacturing contraction, with the PMI stuck at 49.4 as output and new orders continued to retreat.

These dynamics limited support for the currency despite solid exports, which rose 8.4% in November.

The South Korean won appreciated to around 1,465 per dollar on Thursday, extending gains for the third consecutive session as investors digested the latest policy signal from the Bank of Korea.

The central bank maintained its benchmark interest rate at 2.5 percent, a decision regarded as supportive of currency stability amid gradually improving financial conditions.

The rate hold, its fourth in a row, reinforced confidence that policymakers are focused on maintaining stability while guiding the economy through its broader easing phase.

Adding to the positive sentiment, the Bank of Korea raised its economic growth forecast for South Korea to 1 percent for 2025, reflecting a recovery in domestic consumption and exports.

The revision marked an increase of 0.1 percentage point from the previous projection of 0.9 percent issued in August.