Bank of Korea reports won gains as foreign investors sell

The Bank of Korea said the won strengthened against the US dollar since July, as a weaker dollar and improved foreign-exchange market supply and demand lifted the currency.

The won stood at 1,416.0 per dollar on Aug. 11, compared with 1,549.4 at the end of June. It also gained against the Japanese yen and Chinese yuan.

The dollar weakened after US employment data deteriorated and expectations for further Federal Reserve rate increases diminished.

Global investor sentiment remained favorable despite renewed Middle East conflict and concern over rising interest rates, supported by strong corporate earnings, the bank said. US stocks rose as concerns over the profitability of AI infrastructure investment eased, while European stocks gained on demand for global portfolio diversification. Japanese shares declined with broader weakness in IT hardware, including semiconductors.

Foreign investors recorded a net outflow from Korean securities in July. Equity funds recorded outflows amid rising Middle East geopolitical tensions and concern about global AI investment. Bond funds also shifted to outflows as short-term arbitrage incentives became less favorable.

Domestic banks' overseas foreign-currency borrowing conditions remained broadly favorable, the BOK said. The short-term borrowing spread fell to 17 basis points from 25 in June, while the medium- and long-term spread edged up to 41 basis points as average borrowing maturity lengthened to four years from 2.9 years.