On September 18, 2026, Citi's head of Korea trading advised investors to consider buying the Korean won when its value approaches 1,400 per dollar. This recommendation comes amidst a period where the won has experienced depreciation, largely due to the Federal Reserve's hawkish stance and a strengthening dollar. The Fed recently raised its benchmark rate by 25 basis points to 3.75-4.00%, marking its first rate hike since July 2023, which pushed the dollar index above 100 and caused global dollar strength.
Despite the immediate upward pressure on the dollar-won exchange rate, some analysts, including those from State Street and KB Kookmin Bank, project the won-dollar rate to reach 1,390-1,400 won by year-end. However, they also suggest this might be a temporary technical rebound rather than a structural reversal of the won's strength, which is heavily influenced by the semiconductor cycle. The won had previously strengthened past the key psychological level of 1,400 per dollar in August 2026, reaching 1,398.80 per dollar, fueled by a booming semiconductor industry, before retreating.
The current depreciation saw the won fall to a 23-month low of 1,334.7 won on September 7, and then rebound to 1,382.2 per dollar by September 17. Exporters' dollar-selling pressure, which had previously driven the won lower, has weakened as semiconductor-related foreign exchange transactions subsided. Foreign investors' net selling of over 2.2 trillion won in the securities market and increased settlement demand from importers who delayed dollar purchases also contributed to the won's recent weakness. The Bank of Korea also reported a net outflow of $4.5 billion in foreign securities investment funds last month, primarily from bond funds.
South Korean foreign exchange authorities are reportedly keen on keeping the won-dollar exchange rate below 1,350 won and may coordinate with the National Pension Service to achieve this. The National Pension Service's suspension of currency hedging and potential gradual resumption of spot dollar purchases in the second half could impact the exchange rate. Citi economists also highlight that enhanced shareholder return programs by South Korean memory semiconductor companies are positive for the won's value, although about half of these funds might be converted to dollars if foreign investors repatriate them.
