South Korean Won: Consolidation zone eyed against US Dollar – Commerzbank

FXStreet Insights Team FXStreet

Commerzbank’s Charlie Lay and Dr. Henry Hao highlight South Korea’s strong export-led growth and large current-account surplus as key drivers of Korean Won strength against the Dollar. They note that increased National Pension Service hedging and corporate repatriation have reduced financial-account offsets, and expect USD/KRW to consolidate near current levels as Bank of Korea tightening and prior appreciation already weigh on financial conditions.

Won strength driven by surplus flows

"On the currency, the external backdrop has been supportive for some time, but the key change appears to be how South Korea's large current-account surplus is being recycled. Despite persistent current-account surpluses, KRW remained weak for much of the past year as strong overseas portfolio investment, including largely unhedged NPS purchases, absorbed much of the country's underlying FX inflows."

"More recently, increased NPS hedging and sizeable corporate repatriation flows, including proceeds from a US listing by a major semiconductor company, have reduced this financial-account offset, allowing the exceptionally strong external surplus to translate more directly into a stronger KRW. Expectations of further BoK tightening provide additional, rather than primary, support through the rates channel."

"The July MPC minutes showed broad agreement that further tightening would be needed. The main argument for waiting until October is the recent tightening in financial conditions following strong KRW appreciation and heightened volatility in the KOSPI."

"However, given the magnitude of the recent appreciation, further gains could become more gradual, particularly as the BoK has acknowledged that the stronger won is already tightening financial conditions. We therefore see scope for USD/KRW to consolidate around the 1,350-1,400 area in the near term."

"USD/KRW has fallen sharply since the end of June, from around 1,560 to 1,385, implying KRW has gained over 12% vs USD over this period. The combination of a record current-account surplus and a smaller financial-account offset should remain supportive for KRW."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD remains offered; bears target 1.3600

GBP/USD now leaves behind part of its recent recovery and revisits the low 1.3600s at the beginning of the week. Indeed, Cable trades with a mild downward bias amid decent gains in the Greenback as investors remain wary of upcoming US data releases and the Jackson Hole event.

EUR/USD remains sidelined above 1.1650

EUR/USD trades on the defensive following the closing bell on Wall Street on Monday, hovering around the 1.1660 region and adding to Friday’s small decline. The pair’s pullback comes in response to an acceptable rebound in the US Dollar in a context of generalised caution ahead of key US data releases and Chair Warsh’s speech in Jackson Hole.

Gold poised to extend its bullish run

Gold surrenders part of its initial advance, although it keeps its bullish pace well and sound above the $4,600 mark per troy ounce on Monday. The precious metal’s move higher comes despite slight gains in the US Dollar and a modest pullback in US Treasury yields across the curve.

XRP surged 72%, but is the rally really about XRP?

Ripple (XRP) surged more than 72% in less than a week, its strongest rally since July 2025, as cryptocurrency prices broadly broke out. But the move has a problem: it may have little to do with XRP itself. The token's near-term rally appears to have been driven largely by a broader liquidity shift after the US Treasury expanded long-end bond buybacks, pulling yields lower and lifting risk assets.

Convulsion in credit markets

The United States government just posted a $432.3 billion deficit for July, the largest monthly shortfall since March of 2021. That single burst of red ink pushed the yeartodate deficit to $1.8 trillion, with two months still remaining in fiscal 2026. At this pace, Washington will soon wax nostalgic for the “good old days” when annual deficits were only $2 trillion.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.