As dollar strength continued, the South Korean won was seen recovering to the 1,360 range, while the KOSPI rose in the Seoul market on the 31st. The won ended trading at KRW 1,368.60 per US dollar, approaching a level of dollar weakness not seen in about a year.
On the 31st, the won ended trading in Seoul's foreign exchange market at KRW 1,368.60 per US dollar, up KRW 10.90 from the previous business day. The KOSPI rose 31.14 points, or 0.46%, to close at 6820.02. While the impact of dollar strength eased at times, the won rebounded to a level close to its strongest in 12 months.
The dollar also strengthened at times in response to comments from the Federal Reserve, but its decline against the won was limited. The yen traded at around JPY 160 per US dollar, and signs of decoupling were observed. Improving semiconductor demand, the current account surplus and inflows of ADR funds for SK hynix helped push up the market.
An improved economic outlook also supported the won's appreciation. The Bank of Korea raised its growth forecast to 3.3% for this year and 2.9% for next year. Interest rates rose to around 3%, while the narrowing US-South Korea interest rate gap also provided support. Going forward, a decline in the supply of dollars from ADRs and expectations of further Fed rate hikes could again affect the won exchange rate.
Foreign investor outflows eased, with average net selling in July and August declining to the 10 trillion won range. Some analysts also said that the conversion of domestic investment funds into won increased the supply of dollars.
September will be a period for determining whether the won can resume its upward trend, depending on fluctuations in the supply of dollars.