The won is nearing 1,600 per dollar, and the real reason it’s rising now is different
As of June 2026, the won-dollar exchange rate is trading in the KRW 1,530s. It has risen by nearly another 50 won in less than two months, from KRW 1,483 at the end of April. The market is full of competing explanations, such as “the government has pumped out too much money” and “it’s because of Korean retail investors buying US stocks.” BITPRESS cross-checked data from the Bank of Korea, KDI, the KDB Future Strategy Research Institute and the Korea Institute of Finance to estimate how much each factor contributed to the further rise since April 2026.
First, one caveat. Even the Bank of Korea does not publish official figures on what drives the exchange rate. It is a price created by thousands of orders at once, so isolating any single factor precisely is structurally impossible. The figures below are qualitative estimates based on published research, and we make clear that they are inferences.
- Foreign profit-taking in stocks — about 30%
This is the most direct pressure behind the exchange rate’s rise in this period. In May 2026 alone, net outflows of foreign equity investment reached $31.83 billion, the largest since the Bank of Korea began compiling the data in 2008. From January through May, a cumulative $77.8 billion flowed out.
Reading this figure as a “flight from Korea,” however, is a misreading. The Bank of Korea explained that foreigners moved to take profits and rebalance their portfolios after the KOSPI surged past 8,000. In other words, it was closer to mechanical selling to adjust weights after stocks rose too much. When foreigners sell stocks and convert won into dollars to leave, the market sees “won selling + dollar buying” at the same time, and the exchange rate rises immediately.
★ Note
Portfolio rebalancing: When an asset’s price rises, its weight in the overall portfolio grows. Rebalancing means selling part of the asset that rose to bring it back to the target weight. It has nothing to do with a negative view of a particular country.
★ End of note
- Korea-US rate gap and strong dollar — about 28%
The US Fed held its benchmark rate in June 2026 but signaled a higher rate path than before, supporting the dollar. The upper bound of the US benchmark rate is now 3.75% and the Bank of Korea’s base rate is 2.50%, a gap of 1.25 percentage points. Simply holding dollars earns more interest than holding won, so a constant pull draws money toward the dollar.
Some ask whether the problem would be solved if the Bank of Korea raised rates to narrow this gap. But raising rates could make the household debt burden explode, leaving it stuck either way. The government would like to spend more to boost the economy, but doing so creates a dilemma: the market reads it as “more won being supplied,” which directly pushes the exchange rate up. So the approach the government chose is “to draw private dollars into won without touching the market directly.”
In fact, the government is calling in large exporters and asking them to convert the dollars they earned from exports into won at home. Even though companies could profit from currency gains by holding on to their dollars, they are effectively receiving a request for cooperation that is close to pressure. It is no different from market intervention in which the foreign exchange authorities sell dollars directly, but the government prefers it because it does not have to draw down foreign exchange reserves.
- Middle East geopolitical uncertainty — about 18%
Korea depends heavily on imported energy. When unrest in the Middle East grows, demand for dollars to buy crude oil rises, and import prices go up as well. The Bank of Korea pointed to both rising geopolitical uncertainty in the Middle East and foreigners’ net selling of Korean stocks as the background to the exchange rate’s rise in May 2026. As negotiations with Iran made progress and this factor began to ease somewhat, it became one of the reasons the exchange rate recently came down a bit from KRW 1,540.
- Structural pressure from overseas stock investment — about 12%
The factors of Korean retail investors in US stocks and the National Pension Service, which drove the formation of the high exchange rate from late 2025 to early 2026, have weakened somewhat in the most recent period. There were even times in April–May 2026 when Korean investors temporarily net sold US stocks. Still, structurally steady demand for dollar assets continues, so it acts as background pressure.
- Money supply and fiscal pressure — about 7%
As of April 2026, M2 broad money was up 5.7% from a year earlier. The first supplementary budget, drawn up to respond to the war in the Middle East, reinforced the fiscal expansion. As noted earlier, the government would like to spend more, but that move itself is read as a signal for a higher exchange rate, so for now it is taking a detour: rather than raising direct spending, it is nudging companies to convert dollars voluntarily. The explanation that “the won weakened because the government pumped out money” holds as structural background, but there is little evidence that it directly caused the latest leg up.
★ Note
M2 (broad money): a wide measure of the money supply that includes cash, demand deposits, time deposits and money market funds. When M2 grows, more won circulates in the economy, which puts downward pressure on the won’s value over the long run.
Supplementary budget: an additional budget drawn up after the main budget is passed, when circumstances change.
★ End of note
- Sentiment and herding — about 5%
Once the exchange rate passes 1,500 won per dollar, market participants change their behavior. Exporters hold off on selling dollars, importers buy dollars in advance, and a belief spreads that the rate will not come down much even if the authorities step in. Part of the reason the government is asking large exporters to convert their dollars is to break this herd mentality. Simply signaling to the market that “dollar supply is coming” can be enough to cool those expectations.
BITPRESS Insight
The core reason the won is weakening now is not that “the government is printing money.” It is the combination of three forces: foreign investors taking profits after the KOSPI’s surge, high U.S. interest rates that favor the dollar, and unrest in the Middle East that has pushed dollar demand even higher.
Within this structure, the government has boxed itself into a dilemma. It wants to expand spending to support the economy, but doing so itself signals a weaker won. So the card it chose is pressuring large exporters to convert their dollars, a last-resort measure meant to create dollar supply while conserving foreign exchange reserves. For the companies, it amounts to being asked to give up profits at a time when simply holding dollars would earn them currency gains.
For investors, two points stand out. Foreign profit-taking is a reaction to the stock rally, so this pressure should ease naturally if the KOSPI corrects. And if geopolitical uncertainty in the Middle East fades, dollar demand could fall quickly and the exchange rate could drop sharply in the short term. Investors should also keep in mind that the weak won may not be a permanent new normal but a phase in which several temporary factors happen to overlap.
