Won Surges, and Forecasts Point to Further Gains, Putting Exporters on Edge

The won has strengthened at an unusual speed, falling below the psychologically important 1,350-won-per-dollar level and raising concern among South Korean exporters of semiconductors and automobiles.

The dollar-won rate stood at 1,340.5 won on Sept. 7, down 13.8% from this year’s closing high of 1,555.8 won on July 2, according to the Bank of Korea’s economic statistics system. Analysts said several forces have combined to drive the rapid move.

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Given supply and demand conditions, the exchange rate’s upside appears very limited unless an unexpected factor, such as an external shock, intensifies capital outflow pressure as it did in the first half of the year.

The initial shift was linked to large-scale conversion into won following SK hynix’s issuance of American depositary receipts. Once the exchange rate began to fall, exporters that had been holding dollars, despite strong semiconductor exports, reportedly began selling the currency in large numbers, accelerating the won’s gains. South Korea’s successive interest-rate increases also narrowed the policy-rate gap with the United States. Expectations that the Bank of Japan would raise rates more quickly helped strengthen the yen, with effects carrying over to the won.

Some analysts now see room for the rate to fall toward the low 1,300-won range or below. Lee Jeong-hoon of Daishin Securities said the exchange rate’s upside appeared constrained unless an unexpected external shock intensified capital outflows. Cha Young-hoo of Eugene Investment & Securities said pressure for a stronger won could remain dominant through next year, potentially pushing the lower end of the exchange-rate range below 1,300 won.

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Considering capital inflows and outflows, the growth gap and interest-rate paths between South Korea and the United States, and the authorities’ stance, pressure for a stronger won is likely to remain dominant through next year.

That outlook is unfavorable for exporters that benefited earlier this year from a weaker won. NH Investment & Securities analyst Kim Gyu-jin said companies could see their won-denominated profits decline. The combined effect of export and import exposure could cut fourth-quarter semiconductor sales by about 2.6 trillion won, according to his analysis.

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From a corporate earnings perspective, there is concern that won-denominated profits will decline.

Analysts identified shipbuilding, automobiles and IT hardware as industries vulnerable to a stronger won. Mirae Asset Securities cut its operating-profit estimate for Samsung Electronics by 5.7% after raising its DRAM average selling-price forecast by 4.8 percentage points, citing the exchange rate. DB Securities also said SK hynix’s third-quarter sales and operating profit could fall slightly below market expectations despite solid server demand and rising memory prices.

The auto sector faces a similar concern. An analyst at Yuanta Securities said continued won strength could lead to lower earnings estimates for Hyundai Motor and Kia from 2026 to 2028, making their price-to-earnings ratios appear higher even if their share prices do not rise.

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It is a question of whether a company is an exporter or an importer. Industries hurt by a falling exchange rate include shipbuilding, automobiles and IT hardware.