Consecutive interest rate hikes by the Bank of Korea push the won to a near one-year high, with institutions optimistic about further appreciation potential

(1) The Bank of Korea raised its benchmark interest rate to approximately 3.0% on Thursday, marking the second consecutive tightening of monetary policy after a 25 basis point hike in July. Boosted by this move, the Korean won surged against the US dollar to its highest level since July 2025, with a daily gain of about 0.7%. (2) Institutional analysis pointed out that this rate hike is driven not only by inflation above target but also by strengthening and expanding growth prospects. The median in the central bank’s dot plot expects the rate to be further raised to around 3.25% within the next six months, suggesting sustained tightening policy trajectory. (3) The Korean won has appreciated significantly in the short term, but some institutions believe it still has further room to strengthen to around 1,350 won per US dollar. However, after a sharp appreciation, there may be a short-term need for consolidation; the market is digesting the combined impact of consecutive rate hikes on exchange rates and export competitiveness. (4) As a key link in the global semiconductor supply chain, the tension between Korea’s ongoing policy tightening and strong exports will continue to play out in future exchange rate trends. The pressure on import prices and the direction of capital flows will also affect the central bank’s grasp of subsequent policy rhythm.