Good morning. Earlier this year, Korea’s stock market and currency displayed a strange mismatch: an AI‑fuelled equity rally and record trade surplus should have strengthened the won, yet it fell to its lowest level against the dollar since the great financial crisis. Now the story has flipped.

AI jitters drove the highly leveraged Kospi down 44% from its June high to its July low, while the won jumped 9% against the dollar since the start of July, making it one of the world’s best performers last month. The sell‑off may be a rare case where a falling market propels a currency. The rally had pushed the won below fundamentals as global fund managers took profits and sold shares, converting proceeds into dollars.

A more deleveraged market and a dollar‑selling intervention by Korean authorities two weeks ago have reversed that pressure. Interest‑rate differentials between Korea and the US are narrowing; last month the Bank of Korea raised rates for the first time in over three years and signalled ongoing tightening. The AI boom and successes of SK Hynix and Samsung—SK Hynix’s largest‑ever US IPO and Samsung’s multi‑year trillion‑dollar domestic AI build‑out—will sustain dollar selling, bringing the won closer to fundamentals.