Key points
- The Korean won sits near 1,420 to the dollar even though Korea runs a big current account surplus, worth 6.6% of its economy.
- The Bank of Korea says about 70% of the pressure comes from Koreans investing abroad, led by the pension fund and retail buyers.
- Public money led by the pension fund bought about $41B of foreign stocks last year, up from $8B in 2024, most of it unhedged, which adds steady demand for dollars.
The Korean won ended last week at about 1,420 to the dollar, close to where it started the year. That sounds calm, and next to July it is. The won had weakened past 1,550 in early July, its worst level in years, before easing back through August. But 1,420 is still weak by Korea's own history. It's a level that, until the last couple of years, showed up only when something was going wrong, and it's holding there even as the country sells more abroad than it ever has.
Korea just posted one of its biggest export months on record, led by semiconductors. Chip exports topped $40 billion for the second month running, a mark the country had never hit before this summer, and they are running at a record pace for the year. It also runs a current account surplus worth 6.6% of its economy, up from 5.3% the year before. Money like that usually pushes a currency up, because buyers overseas have to buy won to pay for the goods. The won hasn't moved up. The dollars come in from trade and leave again somewhere else.
The Bank of Korea (한국은행) has framed it in numbers. One of its board members, Kim Jong-hwa (김종화), estimated that about 70% of the pressure pushing the won lower comes from money flows rather than trade, and named overseas investment by the pension fund, asset managers and individuals as the main reason. The country's national pension fund and its retail investors have been buying foreign stocks at a pace the bank called unusual.
The government sector, led by the National Pension Service (국민연금) that manages the country's retirement savings, added foreign stocks at a faster and faster rate, buying about $8 billion in 2024 and about $41 billion last year. Most of that was done without any currency hedge, so each purchase meant buying dollars and selling won. Households and non-bank firms went the same way, lifting their foreign stock investment from about $34 billion to about $73 billion, most of it late in the year. Korean retail investors on their own bought more than $30 billion of foreign stocks in 2025.
The Bank of Korea described the trend as "a unique phenomenon." The point is that this weakness has a different cause than it used to. In earlier bouts of stress the won fell because money fled the country in a hurry. Now the money is leaving by choice, with Koreans deciding to hold more of their savings in foreign assets, and that demand for dollars sits under the currency all the time.
Korea isn't the only one to notice. Last month the US Treasury kept Korea on its currency monitoring list, the group of ten economies it watches, and for the first time it pointed at Korean investors' overseas buying as a reason the won has stayed weak. The Treasury normally presses countries over trade surpluses, so naming investor flows was a new note. Korea's finance ministry said it would keep working with the Treasury on the currency market.
I wrote last week about how Korean retail investors sent a record amount of money into US stocks in July, then sat out the Kospi's rebound. That money going abroad is part of why the won keeps failing to strengthen, and part of why 1,420, a number that once meant trouble, is starting to look like one Korea may have to live with. The market's closed Monday for the holiday. When it reopens, the won will still turn on the same question, whether Koreans keep moving their money abroad faster than the country earns dollars selling to the world.
Sources
- 전자신문, 반도체 잘 팔아도 달러가 새는 한국…"원화 가치 잡아 먹는 서학개미?", on the Bank of Korea and Treasury figures and the "unique phenomenon" framing
- MBC뉴스, 한국은행 금융통화위원 "환율상승 요인 70%, 해외투자 증가 영향", on the Bank of Korea's 70% estimate
- 파이낸셜뉴스, 美, 韓 등 10개국 환율관찰대상 유지…'서학개미' 열풍 주목, on the US Treasury monitoring list
- 센머니, 원·달러 환율 1420원대 하향 마감, on the current won level
- Our earlier coverage: Korean retail investors' record US stock buying in July, Korea's near-record July exports
The Bank of Korea's phrase is translated from Korean, and the source titles are in the original Korean. This is general market commentary and not investment advice.
