Pedestrians pass by a currency exchange store in Myeongdong, central Seoul, on Aug. 23.YONHAP
The global tech boom has been making Korean investors money, except that it hasn't.
The stronger won has emerged as an unexpected threat to Koreans who invest overseas. While the dollar prices of major assets such as U.S. stocks, gold and bonds have risen, foreign exchange losses have eaten into those gains once investors convert their returns back into won.
The won strengthened by 4.1 won from the previous session to trade at 1,382.4 won against the dollar on Monday, according to the Seoul foreign exchange market. That marked the won’s strongest level against the dollar in about 11 months. The won was trading at 1386.1 won against the dollar as of 3:30 p.m. Tuesday. Two months ago, on July 1, the Korean currency had weakened to as low as 1,559.2 won per dollar.
Investors who bought dollar-denominated assets when the won was weaker have taken an especially hard hit. The stronger won has wiped out a sizable share of their gains from rising asset prices.
The impact is clear in exchange-traded fund returns, where funds track the same underlying assets, but the won’s strength against the dollar widened the return gap.
The Tiger U.S. S&P 500 ETF lost 2.47 percent over the past month, according to Koscom’s ETF Check, an ETF analysis platform. The ETF’s currency-hedged counterpart gained 3.23 percent over the same period.
The same pattern appeared in tech-focused funds. The Tiger U.S. Tech TOP 100 ETF lost 2.06 percent over the past month, while its currency-hedged counterpart gained 3.58 percent.
An electronic display board shows the dollar-won exchange rate in Hana Bank's trading room in central Seoul on Aug. 25.YONHAP
Gold investors saw a similar divide. The Ace KRX Gold Spot ETF gained 10.41 percent, while its currency-hedged counterpart, the Kodex Gold Futures (H), climbed 14.78 percent.
The stronger won also hurt returns on U.S. Treasury investments. The Ace U.S. 30-Year Treasury Active ETF lost 6.57 percent, while its currency-hedged counterpart limited its loss to 0.76 percent.
Market watchers say the won could strengthen further to around 1,350 won against the dollar.
Several factors have supported the won. Korea’s trade surplus has widened on strong semiconductor exports, while foreign investors have eased their net selling of Korean shares.
Major companies such as Samsung Electronics and SK hynix are also expected to sell dollars for won ahead of interim corporate tax payments at the end of August and plan to increase shareholder returns. Forward dollar sales by some shipbuilders and pension funds have also added pressure for the won to strengthen against the dollar.
Bundles of U.S. dollars and Korean won are piled up in at Hana Bank in central Seoul in April.YONHAP
“Unlike in the first half of the year, dollar supply has continued to outweigh demand in the second half,” Park Sang-hyun, a researcher at iM Securities, said. “The market expects this supply-heavy environment to continue for some time.”
Still, several factors could prevent the won from strengthening much further against the dollar.
Korea is set to invest a total of $200 billion in the United States — not including the $150 billion pledged to the U.S. shipbuilding sector — under its trade agreement with Washington, with annual investment capped at $20 billion. The investment could increase demand for dollars and weaken the won against the dollar.
Korean retail investors could also return to U.S. stocks after the won’s recent appreciation against the dollar. Renewed demand for U.S. stocks could increase demand for dollars, putting downward pressure on the won. A possible return to a more hawkish stance by the Federal Reserve could also weaken the won against the dollar.
A view shows the New York Stock Exchange Wall Street entrance in New York on April 7, 2025.REUTERS/YONHAP
Experts, however, say unhedged investments may still be more advantageous in the long term because they can support asset allocation and risk diversification.
“From a long-term investment perspective, unhedged investments are more advantageous,” Paik Seok-hyun, a researcher at Shinhan Bank, said.
The dollar can also provide a cushion during market downturns.
“During a global financial crisis or a sharp stock market downturn, the dollar typically surges because of its status as a major safe-haven asset,” Kim Seung-hyeon, head of the 1Q ETF solution division at Hana Asset Management, said. “The stronger dollar can act as a buffer against losses from falling stock prices when returns are converted into won.”
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
