Investors Betting on Korean Won
Recent reports suggest that hedge funds are turning their focus to the Korean won. Market data from the Depository Trust & Clearing Corporation shows a surge in options trading volume for the USD/KRW exchange rate, reaching a 2025 high last week. Barclays Bank also notes a significant increase in put options purchases by hedge funds. Last Wednesday, demand for put options on the currency pair with notional sizes exceeding $60 million surpassed the demand for call options by a ratio of 3:2, indicating a preference for bearish bets on the pair. Additionally, the premium for hedging against a USD/KRW downturn in the next month compared to an upswing traded near a 21-year high last week.
All of this comes in the wake of a sharp rise in the Taiwanese dollar in May, fueling expectations of a rally in Asian currencies against the US dollar. Korea’s trade surplus with the US has increased pressure on Korean authorities to tolerate a stronger currency. The won may be one of the currencies expected to appreciate in the coming months. Moreover, talks between the US and its trading partners have highlighted President Donald Trump’s inclination towards a weaker dollar.
Amidst these dynamics, the Korean won is becoming a highly sought-after currency. Mukund Daga, Barclays’ Head of FX Options for Asia in Singapore, stated that hedge funds have been questioning which currency could move similarly to the Taiwanese dollar, leading them to focus on the Korean won, which has seen “decent demand for USD/KRW put options.”
Is Buying the Korean Won a Good Idea?
Given the recent performance of the Korean won, some currency traders are contemplating whether to enter the market or not. According to Priyanka Kishore, Chief Economist at Asia Decoded Pte, “there are broader reasons to remain bullish on the won in the short term. Korea’s trade prospects are supported by strong demand in artificial intelligence, while equity inflows could rebound with reduced political uncertainties after the June 3 presidential elections.”
Ivan Stamenovic, Bank of America’s Head of G-10 FX Trading for Asia Pacific, believes that “the market is showing an insatiable appetite for holding won options,” which could support the currency rally.
Agreeing with this sentiment is Saurabh Tandon, Global Head of Foreign Exchange Options at Standard Chartered Bank in Singapore, who mentioned that “the dollar-won pair was already seeing active interest in downside operations following the significant move in the Taiwanese dollar a few weeks ago.” Recently, interest in downside operations for the currency pair has strengthened, he added.
