South Korean Won: Intervention risks support KRW against US Dollar – DBS

Chang Wei Liang at DBS Group Research notes that KRW is currently the best performing Asian currency, supported by strong semiconductor demand and reported FX intervention coordination between Korea, the US and Japan. Despite equity volatility in Korean chip stocks, physical memory demand and AI-related semiconductor needs are driving a terms-of-trade boom, reinforcing DBS’s preference to stay short USD/KRW on ongoing intervention risks.

Semiconductor boom and FX support

"KRW is the best performing Asian currency this week, lifted by strong semiconductor demand and intervention risks."

"Despite equity market volatility due to a correction in Korean semiconductor stock prices, physical demand for memory chips has not seen any correction and is powering memory prices to new highs."

"AI-related semiconductor demand is fuelling a massive term of trade boom for the Korean economy, and KRW is just beginning to benefit from this."

"Interestingly, the Korean authorities had reportedly co-ordinated with the US and Japan in FX market interventions to lift the KRW, though it is not of the same scale and impact as the JPY interventions."

"Risks of further joint interventions nudged by the US Treasury supports our view to stay short USD/KRW."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)