Key facts
- The South Korean won saw its largest monthly gain since March 2009.
- The won appreciated 7.95% against the U.S. dollar in July.
- This surge was largely driven by inflows from SK hynix's American depositary receipt offering on the Nasdaq.
- SK hynix raised approximately 40 trillion won (US$26.5 billion) from the offering.
- Market experts anticipate the won will continue to strengthen due to economic growth and potential interest rate hikes by the Bank of Korea.
The South Korean won experienced its most significant monthly appreciation against the U.S. dollar since 2009, largely attributed to substantial inflows from SK hynix Inc.'s recent American depositary receipt (ADR) offering on the Nasdaq. The won strengthened by 125.4 won in July, reaching 1,424 per U.S. dollar by the end of the month, a notable rebound after hitting a more than 17-year low earlier in July.
This surge in the won's value, representing a 7.95 percent gain against the dollar for the month, outpaced other major currencies like the Japanese yen, Swedish krona, and British pound. Market experts pinpointed the ADR offering as the primary driver, with SK hynix converting the proceeds, estimated at approximately 40 trillion won (US$26.5 billion), into the local currency for domestic investments, including its Yongin semiconductor cluster.
Looking ahead, economists anticipate the won's upward trajectory to continue. Factors supporting this outlook include stronger-than-expected economic growth in South Korea and the expectation that the Bank of Korea will maintain its pace of interest rate hikes, thereby narrowing the interest rate differential with the United States. One economist from Woori Bank suggested the won has entered an upward cycle, with the exchange rate potentially falling to around 1,380 won per dollar, though future dollar inflows and monetary policy decisions remain key variables.