South Korean Won: AI-driven exports support KRW outlook – Commerzbank

Commerzbank highlights South Korea’s exports rising over 50% year-on-year in early July, marking a seventh month of double-digit growth, driven by semiconductors and AI-related data centre demand. The Bank of Korea (BoK) has started a tightening cycle, projecting a Base Rate near 3.0%, while officials expect stronger corporate USD-forward selling and capital inflows to support Korean Won appreciation despite recent USD/KRW gains.

BoK hikes as AI demand boosts trade

"South Korea’s exports in the first 20 days of July rose 52.3% yoy vs 60.4% in the same period of June. This marked the seventh consecutive month of double-digit export growth, suggesting external demand remains resilient despite ongoing supply chain disruptions linked to renewed tensions in the Middle East."

"On monetary policy, the Bank of Korea (BoK) hiked rates by 25bp to 2.75% last week, the first time in three years. It cited elevated price pressures and financial stability risks due to a weak KRW and rising home prices."

"It is expected to hike by another 25bp this year, taking the Base Rate to 3.0%. This will be in line with the BoK’s median rate projection in the latest dot plot."

"In FX, USD/KRW rose by 0.3% to 1,482 yesterday due to the firmer USD. Nonetheless, Deputy Finance Minister Moon Ji-sung sounded optimistic that KRW could strengthen due to increased corporate selling of USD forwards in H2. He said that this could “shift retail investor sentiment, further accelerating the KRW’s appreciation”."