Korean Won: Strong Exports Support KRW and KOSPI – DBS Bank

DBS Group strategists Taimur Baig and Nathan Chow said in a note that South Korea's August exports are expected to maintain strong momentum, with year-on-year growth near 60%. Although this growth rate has eased from the peak set in June, the absolute level of exports remains high, laying a solid foundation for the outlook of the Korean won (KRW) and the KOSPI stock index.

**Export resilience provides fundamental support**

The strategists believe that semiconductor demand related to the AI boom is a key driver of South Korea's export strength. Despite recent volatility in Korean chip stocks, demand for memory chips remains robust, continuing to improve South Korea's terms of trade. This export growth, driven by actual demand rather than speculative sentiment, provides a reliable fundamental anchor for the won. As of the latest data, USD/KRW was trading near 1378.8068.

**Foreign inflows and policy expectations form dual support**

Beyond trade channels, capital flows are also influencing the won's trajectory. DBS Bank previously noted that foreign investors are taking advantage of the KOSPI pullback to increase equity holdings, and such inflows provide additional support for the won. Moreover, persistent inflationary pressures in South Korea may prompt the central bank to further tighten monetary policy. DBS economists had projected that the Bank of Korea could raise its benchmark rate from 2.50% to 2.75% to address CPI inflation consistently above 3%. Rate hike expectations also bolster the attractiveness of won-denominated assets.

**External coordination factors cannot be overlooked**

DBS Group Research also mentioned reports of coordinated foreign exchange intervention among South Korea, the United States, and Japan, which adds support for the won. Against the backdrop of joint intervention risks, DBS maintains a preference for shorting USD/KRW. Overall, strong exports, foreign inflows, potential rate hikes, and external policy coordination together form a multi-faceted supportive framework for the won and the KOSPI.