Overview
- The South Korean won is trading near multi-year lows around 1,555 per dollar even though June exports hit a record $102.25 billion, showing a disconnect between strong trade receipts and currency moves.
- On Thursday foreign investors sold a net 4.3 trillion won of local stocks, marking the tenth straight day of net selling and adding persistent dollar demand that has pressured the currency.
- Korean resident investors have been buying large amounts of U.S. assets, driven in part by demand for AI-linked tech stocks, which increases dollar demand and offsets export dollar inflows.
- Authorities have stepped up tools and checks, including joint inspections of banks' FX desks, FX swaps with the National Pension Service, raising the FX-stabilisation bond limit and preparing a broader 100 trillion won market-stabilization programme.
- Reserves rose modestly to $427.36 billion in June while the KOSPI has surged roughly 85%, a divergence that raises risks for higher import costs, rising inflation and possible pressure on Bank of Korea rate policy.