South Korean Won Hits Five Month High Amid Market Volatility

The South Korean won strengthened to its strongest level in five months on Thursday, closing at 1,437.4 per U.S. dollar. This represents an increase of 9.3 won from the previous day. The currency's gain followed a decision by the U.S. Federal Reserve to hold benchmark interest rates steady in the 3.5 to 3.75 percent range, marking the fifth consecutive pause. However, three Fed policymakers dissented and called for a rate hike, which has raised speculation regarding future increases.

Foreign investors supported the won's strength by net purchasing approximately 1.3 trillion won in local stocks. Despite this activity, the benchmark Korea Composite Stock Price Index fell 1.23 percent to close at 5,593.56. The market remained volatile throughout the session. Samsung Electronics reported record second quarter revenue of 171.5 trillion won and operating profit of 89.5 trillion won, which initially drove shares up as much as 8 percent before those gains were surrendered.

Perspectives on the currency's movement differ by political lean. Center leaning coverage attributes the won's advance primarily to the Federal Reserve's rate decision and foreign stock purchases. Center right framing emphasizes a broader set of drivers, including stronger than expected second quarter growth, expectations of a narrower Korea US rate gap, and increased corporate conversion of dollar holdings into won.