SK hynix-related dollar inflows, month-end exporter selling, a weaker U.S. dollar, foreign equity buying and China stimulus optimism lifted the won to its strongest levels since January.
The South Korean won strengthened sharply in late July, with the dollar-won exchange rate closing regular trading in Seoul at 1,424.0 won on the 29th, down 13.4 won from the previous session and its lowest close since January 28. The pair fell as far as 1,418.0 won in early trading before rebounding on bargain hunting. Support came from broad U.S. dollar weakness after U.S. inflation data matched expectations and the Federal Reserve kept rates unchanged, as well as from SK hynix-related dollar inflows, month-end exporter selling and improving sentiment around South Korea's semiconductor sector. The won was also helped by a sharp rebound in risk appetite, including heavy foreign buying of KOSPI stocks, a recovery in the yen and optimism that China could add policy support. Risks cited in the reports include whether the rally can be sustained, along with renewed U.S.-Iran tensions and possible oil-price volatility.