Won hits 2-year low against dollar on semiconductor export surge

The won-dollar exchange rate fell to its lowest level in two years and one month in October, driven by a surge in dollar supply stemming from strong semiconductor exports. The won's advance came even as the dollar strengthened globally. The won-yen cross rate also hit its lowest point in 18 years and 10 months.

Analysts said economic fundamentals continue to support the won's strength, but cautioned that price volatility tied to external uncertainties is likely to persist.

According to the Bank of Korea's economic statistics system, the average won-dollar rate over the first 12 trading days of this month — measured at 3:30 p.m. — stood at 1,342.6 won, the lowest monthly average since September 2024 (1,332.8 won).

The monthly average rate had climbed to 1,492.5 won in March in the wake of the Middle East war, then surged further to 1,528.0 won in June amid rising oil prices and foreign selling of domestic shares.

The trend reversed around the time of SK hynix's listing on the American Depositary Receipt market in the United States. Dollar selling by export-oriented companies, particularly in the semiconductor sector, added further downward pressure, pushing the monthly average rate down to 1,488.9 won in July, 1,404.4 won in August and 1,358.8 won in September.

This month, the rate slid as low as 1,328.9 won around 7:20 p.m. on Friday, breaking into the 1,320-won range and setting a new yearly low. That was the weakest level since Oct. 2, 2024, when the rate stood at 1,317.1 won.

A sustained trade surplus has increased the supply of dollars in the domestic foreign exchange market, pulling the rate lower. Some analysts also cited a growth outlook in the 3 percent range and the Bank of Korea's tightening stance as additional factors supporting the won.

Bank of Korea Governor Shin Hyun-song said at a national audit session of the National Assembly's fiscal and economic planning committee on Monday that the exchange rate "leaves room for further strengthening going forward." He cited the central bank's consecutive benchmark interest rate hikes in July and August as key factors behind the won's stability.

The won-dollar rate has been moving in the opposite direction from the dollar index. Over the past month, rising US interest rates pushed the dollar index up from the 99 level to around 102, yet the won-dollar rate fell during the same period.

The won-yen cross rate also hit a roughly 19-year low on the back of the won's strength. The monthly average won-yen rate stood at 849.0 won, the lowest since December 2007 (829.2 won). During trading on Monday, the rate fell as far as 839.91 won, the lowest since Jan. 2, 2008 (833.4 won).

While the yen-dollar rate has hovered around 157 to 158 yen recently, the won-dollar rate has fallen sharply from the 1,390-won range to the 1,330-won range. Analysts say the decline in the won-yen rate has been amplified by yen-weakening factors on the Japanese side, including slowing growth and deteriorating fiscal conditions.