The Korean Won strengthened to 1,345 per dollar on Friday, marking its strongest level in 23 months. This appreciation has led to a record increase in dollar deposits at Korea's five largest banks, reaching $76.98 billion as of Thursday. The surge in dollar deposits is primarily driven by companies delaying the conversion of export earnings into Won and importers buying dollars in stages ahead of future payments, as they anticipate further Won appreciation.
Corporate dollar deposits reached a record $63.3 billion, with a significant increase of over $6.9 billion in August and an additional $600 million in the first three days of September. Individual dollar deposits also rose to $13.68 billion, the highest since February 2022, as individuals converted $389 million worth of Won into dollars in August. This suggests a strategic move by both corporations and individuals to hold dollars amidst the strengthening Won.
Analysts at KB Kookmin Bank, like Moon Jeong-hee, expect the Won to settle in a range of 1,300 to 1,350 per dollar, indicating potential for further gains. This sentiment is echoed by Ashok Bhundia of the Institute of International Finance, who points to significant investments by Samsung Electronics and SK Hynix in semiconductor fabrication as a key driver. These investments, totaling 800 trillion Won, are expected to lead to repatriation and conversion of export earnings into Won, providing substantial support for the currency through 2026 and into 2027.
The Won's recent strength is a sharp reversal from earlier in the year when it traded above 1,500 per dollar in July. Factors contributing to this turnaround include strong overseas sales generating foreign currency earnings and dollar inflows related to SK Hynix's American Depository Receipts. The current account surplus also widened significantly to $233.09 billion in the first seven months of the year, nearly four times the $59.82 billion recorded in the same period of 2025, primarily due to booming semiconductor exports.
