Record Korean Exports Push the Won to a Two-Year High

The South Korean won has emerged as Asia's best-performing currency this year, strengthening to around 1,345 per dollar in recent trading, its firmest level since October 2024. The USD/KRW exchange rate has fallen nearly 6% year to date, reflecting a wave of export earnings flowing into the country.

Behind the rally is a historic run for Korean trade. The country has already shipped roughly $709.4 billion worth of goods abroad this year, surpassing its entire export total for 2025 with several months still to go. Semiconductors have been the standout performer, with shipments up 169.6% from a year earlier as global demand for AI-related chips continues to accelerate, benefiting major producers such as Samsung Electronics and SK Hynix.

The export strength has also shown up in the country's balance of payments. South Korea posted a current account surplus of $42.08 billion in July, the largest figure ever recorded for that month and the second-highest monthly surplus in the data's history. The numbers point to sustained momentum in overseas demand for Korean goods rather than a one-off spike.

A currency appreciating this quickly, however, carries its own risks for exporters, since a stronger won can erode the price competitiveness of Korean goods abroad. In response, South Korean foreign exchange authorities purchased an estimated $20 billion in early September, a move aimed at slowing the won's ascent rather than reversing it.

The intervention places Seoul in an unusual position relative to its neighbors. Japan has spent much of the year buying yen to prevent further declines, while South Korea is doing the opposite, buying dollars to keep its currency from strengthening too fast. China's yuan has followed a similar upward path, down almost 4% against the dollar this year, with analysts at Goldman Sachs expecting Beijing to keep guiding a gradual appreciation of roughly 3% to 5% annually rather than allowing a sharper market-driven move.

Looking ahead, the trajectory of Asian currencies could hinge partly on the U.S. Federal Reserve's policy decision this month. Traders currently assign roughly 60% to 67% odds to a rate cut under new Fed Chair Kevin Warsh, a move that would tend to work against further gains in the won and other regional currencies if it does not materialize as expected.

For now, the combination of record exports, a historic current account surplus and a currency near two-year highs paints a picture of a Korean economy drawing strong support from the global semiconductor cycle, even as policymakers work to keep the won's rise from moving too far, too fast.