South Korean won strengthened sharply against the US dollar in the second quarter, with USD/KRW plunging 8% according to ING economists Deepali Bhargava and Lynn Song. The rally was fueled by temporary capital flows including Hynix ADR repatriation and hedging adjustments from South Korea’s National Pension Service, combined with a hawkish rate hike from the Bank of Korea.
The won’s surge reflects strong structural support from booming artificial intelligence demand benefiting Korean semiconductor manufacturers, while a more stable US Federal Reserve policy outlook has reduced dollar strength. These technical and fundamental factors converged to drive the currency pair lower during Q2.
Market participants should note that some drivers were one-off flows rather than sustained trends, suggesting potential volatility ahead as these temporary factors fade. The BoK’s hawkish stance contrasts with dovish expectations elsewhere in Asia, providing additional near-term support for KRW.
FXnCO Insight
Traders should monitor whether AI-driven semiconductor demand can sustain won strength once temporary repatriation flows subside, with BoK policy divergence offering tactical long-KRW opportunities.
Source: FXStreet