Most Asian currencies barely moved on September 23, with traders keeping their powder dry amid US-Iran tensions and a firmer US dollar. But South Korea's won bucked the trend, outperforming its regional peers on the back of strong semiconductor exports and inflows tied to the artificial intelligence boom.
What's driving the calm?
In emerging markets, a stronger dollar typically puts pressure on local currencies, especially when investors turn risk-averse. Geopolitical headlines—such as the latest US-Iran friction—can amplify that caution, prompting traders to avoid big bets. That's why many Asian currencies stayed within familiar ranges, with little appetite to push them in either direction.
The US dollar's resilience also played a role. With markets awaiting fresh economic data and speeches from Federal Reserve officials, the greenback held its ground, making it harder for Asian currencies to gain traction. For a closer look at how the dollar is moving, see our recent piece on the dollar firming ahead of Fed speeches.
Why the won stood out
South Korea's won had a built-in advantage: the country's chip exports. Semiconductors are a major export earner for South Korea, and the global AI boom has kept demand for advanced chips strong. That translates into a steady flow of dollars into the economy, which exporters and local banks often convert into won, creating consistent demand for the currency.
Beyond trade, portfolio inflows tied to AI-related investments have also supported the won. As global investors look to tap into the AI supply chain, South Korean tech companies—especially chipmakers—have attracted attention. This dynamic is part of a broader trend across Asia, where AI-linked chip stocks have been rallying, lifting markets in South Korea and Taiwan.
The won's resilience also reflects a widening current account surplus—essentially, the country selling more goods and services abroad than it buys. That surplus brings extra dollars into the economy, providing a cushion against external shocks. While a stronger dollar can still weigh on the won, these structural inflows help it hold up better than currencies without such strong export fundamentals.
What it means for investors
For everyday investors, the key takeaway is that currency moves are rarely driven by a single factor. Geopolitical tensions and dollar strength can push currencies around, but a country's economic fundamentals—like export strength and capital inflows—can provide a buffer.
For those with exposure to Asian markets, the won's performance is a reminder that not all currencies move in lockstep. While most Asian FX stayed range-bound, the won's strength highlights the importance of looking at individual economies rather than treating the region as a monolith.
Investors with international portfolios may also want to keep an eye on currency trends, as they can affect the returns of overseas investments. A stronger won, for instance, can boost the dollar value of Korean assets for foreign investors, while a weaker currency can erode returns.
Looking ahead, traders will be watching for any escalation in US-Iran tensions, as well as upcoming US economic data and Fed commentary. These factors could shift the dollar's trajectory and, in turn, influence Asian currencies. For now, the region appears to be in a holding pattern, with the won as the standout performer.
For more on how Asian markets are reacting to global events, see our coverage of Asian stocks climbing on positive sentiment and the yen steadying near 156.64 as traders watch for possible intervention.
