The dollar-won exchange rate stood at 1,399 around noon, breaking below the 1,400 mark for the first time since Oct. 2, 2025, when it was at 1,399.5. As of 2:50 p.m., it stood at 1,398.3, compared with the previous day's daytime close of 1,411.8.
The strengthening won came after a sharp reversal for the Korean currency, which weakened to 1,549.4 per dollar at the end of June before recovering rapidly in July and August.
The move has largely been driven by changing expectations for U.S. interest rates, with weaker economic data reducing the likelihood of further Fed rate hikes in the near term.
U.S. consumer prices rose just 0.1 percent in July, producer prices were unchanged and retail sales unexpectedly fell 0.6 percent, their first decline in nine months.
Fed funds futures priced in about a 65-percent chance of no rate change in September, while the dollar index hovered around 99.65, near multi-month lows.
The Fed is due to release minutes from its July policy meeting later in the day, offering investors another look at policymakers' appetite for further tightening.
Local dollar supply has added to the pressure, with Korean exporters continuing to convert overseas earnings into won rather than concentrating dollar sales around month-end as they traditionally have.
The stronger currency also comes as South Korea's domestic growth outlook improves, with the state-run Korea Development Institute raising its growth forecast for this year to 3.2 percent from 2.5 percent on stronger global demand for semiconductors and artifical intelligence (AI(-related investment.
The KDI's revised forecast would provide further support for the won, while a weaker dollar and continued exporter selling remained key factors behind its recent gains.
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