The won closed at its strongest level against the dollar in more than two years, driven by dollar selling from foreign banks.
In the Seoul foreign exchange market on the 19th, the won finished at 1,330.30 per dollar, down 1.10 won from the previous session's afternoon close of 1,331.40. On a closing basis, that marks the strongest level since Oct. 2, 2024, when the won ended at 1,319.30.
The currency opened at 1,336.00 before turning stronger during the morning. Dollar selling continued, led by foreign banks, and the won extended its gains in the afternoon, touching 1,327.60 at one point. That surpassed the 1,328.90 low recorded in overnight trading on the 16th, setting a yearly high for the won for a second consecutive day. The currency later gave back part of those gains, closing near the 1,330 level.
Dollar movements alone do not explain the won's strength. The exchange rate has fallen more than 200 won from the 1,550 range in early July, while the global dollar index edged higher over the same period. In other words, the won rose notably among major currencies even as the dollar strengthened globally. Gains in the yen and the yuan fell well short of the won's appreciation.
Analysts point to a widening current account surplus driven by strong semiconductor exports. According to the Bank of Korea, the current account surplus reached $279.2 billion in the first eight months of this year, roughly four times the level a year earlier. Rising dollar inflows from exports are offsetting dollar demand tied to overseas investment and capital outflow pressure, analysts said.
Meanwhile, Deputy Prime Minister and Finance and Economy Minister Lee Hyoung-il described the recent decline in the exchange rate as a process of returning to the fundamentals of the Korean economy. The deputy prime minister said the exchange rate, which had climbed to the 1,550 range in July, had actually been detached from fundamentals.
Market sentiment has tilted toward further won strength, with traders betting on additional declines in the exchange rate.
