The Korean won has strengthened to its highest level against the U.S. dollar in two years and one month, drawing a wave of retail money into bank foreign-currency deposits as the dollar and the yen turn cheaper.
The won averaged 1,342.6 to the dollar in the first 16 days of October, the strongest level since September 2024, according to Bank of Korea data released on the 19th. The currency has firmed for three straight months after the monthly average peaked at 1,528 won in June, easing to 1,488.9 won in July, 1,404.4 won in August and 1,358.8 won in September. On the 16th, it touched 1,328.9 won intraday.
The yen has followed a similar path. The won averaged 849 per 100 yen this month, the lowest in about 19 years, or since December 2007. The move runs counter to a broader dollar rally that has lifted the dollar index from the 99 level to the 102 level over the past month.
Booming semiconductor exports are the main driver behind the won's strength. With South Korea's daily average trade surplus approaching $2.5 billion in September, the dollars generated by exporters have overwhelmed supply in the foreign exchange market. Back-to-back base rate increases by the Bank of Korea in July and August widened interest rate differentials, further supporting the won.
Financial industry officials say the exchange rate is unlikely to rebound sharply as long as chip exports hold up. Most forecasts put the won in the low- to mid-1,300s against the dollar by the end of the year. Geopolitical tensions in the Middle East, rising global oil prices and foreign selling of Korean stocks are cited as factors that could push the rate back up.
Dollar Deposits Hit Highest in Four Years, 10 Months as Bargain Buyers Chase a Weaker Dollar
Retail money is flowing into banks to take advantage of the weaker dollar. Personal dollar deposits at the five largest lenders — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — stood at $14.23 billion as of the 15th, the highest since December 2021 and the most in four years and 10 months. The balance has grown by $2.25 billion from 11.98 billion dollars at the end of June, a gain in less than four months.
Yen deposits also climbed to 265.62 billion yen, the highest since November 2024. Bankers said the increase reflects not only investors betting on currency gains but also rising demand from customers buying yen ahead of trips to Japan and stock investments there.