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South Korean Won Hits 13-Month High on Rate Hike as Asia FX Awaits Fed
The South Korean won strengthened to a 13-month high on Friday following a central bank interest rate hike, standing out in an otherwise subdued session for Asian currencies as investors awaited monetary policy cues from the U.S. Federal Reserve.
Won Surges on BOK Rate Hike
The Bank of Korea (BOK) raised its benchmark interest rate by 25 basis points to 3.0% on Thursday, marking its second consecutive rate increase and lifting borrowing costs to their highest level since February 2025. In response, the won appreciated, with the USD/KRW currency pair falling 0.3% to 1,377.0, its lowest point since July 2025.
The central bank's decision was supported by a significant upgrade to its economic outlook. The BOK raised its 2026 growth forecast to 3.3% from a previous estimate of 2.6%, citing strong exports and robust demand for semiconductors driven by the artificial intelligence sector.
BOK Governor Shin Hyun-song indicated that while further policy tightening is possible, it would likely be gradual as policymakers evaluate the effects of recent hikes, according to the source report.
Broader Markets Await Fed Signals
AdAcross the region, most currency pairs traded in narrow ranges as market participants looked ahead to a speech by Federal Reserve Chair Kevin Warsh at the Jackson Hole economic symposium for clarity on the U.S. policy outlook. The U.S. Dollar Index held steady near a one-week high at approximately 99.18.
Market pricing reflects expectations for continued hawkishness from the U.S. central bank. According to the CME FedWatch Tool, traders see a roughly 35% probability of a rate hike in September and a 75% chance of one by December. This outlook has kept U.S. Treasury yields elevated, limiting potential upside for Asian currencies.
Aussie Dollar Gains on Inflation Data
The Australian dollar was another notable performer, with the AUD/USD pair climbing to a three-month high. The currency's strength was fueled by stronger-than-expected domestic consumer inflation figures released this week, which have increased expectations that the Reserve Bank of Australia may deliver another rate hike this year.
Other major regional currencies, including the Japanese yen, Chinese yuan, and Indian rupee, were largely unchanged against the dollar.
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