HSBC Calls Time on the Dollar-Won Uptrend Begun in 2021
HSBC has ended its call for a rising dollar-won exchange rate, pointing to South Korea's record current account surplus as the reason the five-year trend has run out of road.
HSBC strategists, in a report revising the bank's forecast under Asian FX research head Joey Chew, declared the end of the USD/KRW upward trend that began in 2021, citing a record current account surplus in South Korea.
HSBC has retired one of the more durable views in Asian currency markets. The bank's strategists, in a report revising their forecast, said the upward trend in USD/KRW — the dollar's climb against the South Korean won that began in 2021 — has ended. The reason they give is not a change in Federal Reserve policy or a shift in risk appetite, but something more structural: a record current account surplus in South Korea.
The revision was made by Joey Chew, HSBC's head of Asian foreign exchange research, according to GuruFocus. A higher USD/KRW rate means a weaker won: more won required to buy one dollar. Calling the top of that trend is, in plain terms, a call that the won has stopped depreciating and that the direction of travel has flipped.
Why a current account surplus matters to a currency
The current account measures a country's trade in goods and services plus income flows with the rest of the world. A surplus means more money is coming in from foreign buyers than is going out to foreign sellers. For an exporting economy like South Korea's, that surplus is earned largely in dollars and eventually needs converting into won — a mechanical, recurring source of demand for the domestic currency.
When the surplus is at a record, that flow of conversion demand is at its largest. It does not guarantee a stronger won in any given week; hedging behaviour, offshore investment by Korean pension funds and residents' appetite for foreign assets can absorb a great deal of it. But over quarters rather than days, a persistent external surplus is one of the few forces that reliably pushes back against currency depreciation. HSBC's argument is essentially that this force has grown large enough to overwhelm whatever was driving the won lower for the past five years.
What ending a five-year trend actually implies
The 2021 starting point matters. That is the period when the dollar began a broad advance against most Asian currencies, and the won — a high-beta currency that tends to move more than its peers in both directions because of Korea's open capital markets and export-heavy economy — participated fully. Ending the call means HSBC no longer expects that dynamic to define the pair.
Several groups feel this directly:
- Korean exporters lose a tailwind. A weak won flatters the won value of dollar revenue for semiconductor, auto and shipbuilding firms. Reversing that trend squeezes reported margins even when volumes are unchanged.
- Foreign holders of Korean equities gain one. Investors buying Korean stocks in dollars have spent years watching currency losses eat into local-market gains. A stabilising or firming won removes that drag and can make Korean equity allocations easier to justify.
- Korean importers and households get relief on the cost of energy and food priced in dollars, which feeds through to domestic inflation.
- Carry traders who borrowed in low-yielding currencies to hold dollars against Asian FX face a less forgiving backdrop if the trend genuinely turns.
Currency calls of this kind are also rarely isolated. The won trades in sympathy with the Japanese yen, the Taiwan dollar and, to a degree, the Chinese renminbi. A house view that the dollar's Asian uptrend has ended in one pair tends to be a signal about how a bank is thinking about the whole region.
The rate backdrop the call has to survive
The risk to any bearish-dollar view is US interest rates. The dollar's strength since 2021 has leaned heavily on the yield advantage of US assets, and that advantage is a function of what the Federal Reserve does next. Markets in early September were still digesting a run of firm US data, and the equity tape reflected the uncertainty rather than resolving it.
At the last close before this report, on Friday 4 September 2026, the S&P 500 tracker SPY finished at $770.19, down 0.39% on the day from a prior close of $773.17, trading in a range of $769.00 to $772.87. The Dow 30 tracker DIA closed at $534.08, down 0.53% from $536.93. The Nasdaq 100 tracker QQQ was the outlier, closing at $718.96, up 0.18% from $717.67 after ranging between $716.56 and $721.86.
That split — growth holding while the broader and more cyclical indexes gave ground — is the signature of a market repricing rates rather than growth. If US yields stay higher for longer than expected, dollar demand persists and the won's structural support has to work harder. HSBC's case is that the surplus is now big enough to do exactly that, which is a bet on flows beating rate differentials.
What to watch from here
The dollar's strength since 2021 has leaned heavily on the yield advantage of US assets, and that advantage is a function of what the Federal Reserve does next.
The test of the call will be monthly. South Korea publishes current account data through the Bank of Korea, and the question is whether the record surplus is a peak or a plateau. A surplus that narrows quickly — because semiconductor prices soften, or because Chinese demand cools, or because tariffs bite into Korean exports — would remove the foundation of the argument fast.
Three other things will decide whether this ages well. First, the composition of the surplus: a surplus driven by strong exports supports the won far more convincingly than one driven by collapsing imports, which signals weak domestic demand. Second, outbound investment flows: Korean institutions and retail investors have been substantial buyers of foreign, particularly US, assets, and that dollar buying can neutralise a trade surplus entirely. Third, the Bank of Korea's own stance and any official comfort or discomfort with the level of the currency.
Investors reading the note should also treat it as a house view with a horizon, not a trade signal for tomorrow. A bank declaring the end of a multi-year trend is making a statement about direction over quarters. Currencies are perfectly capable of spending months going nowhere before proving the strategist right — or wrong.
Frequently asked questions
What does a lower USD/KRW rate mean?
USD/KRW shows how many Korean won it takes to buy one US dollar. A falling rate means fewer won per dollar, which is a stronger won and a weaker dollar. HSBC's view that the upward trend since 2021 has ended is therefore a call that the won's multi-year depreciation against the dollar is over.
Why does a current account surplus support the won?
A current account surplus means South Korea earns more from foreigners than it pays out, largely in dollars. Those dollars eventually have to be converted into won to pay domestic costs, creating steady structural demand for the currency. At a record surplus, that conversion flow is at its largest, which pushes back against depreciation over time.
Who at HSBC made the forecast change?
Joey Chew, HSBC's head of Asian foreign exchange research, revised the bank's forecast in a report, according to GuruFocus. The revision declares the end of the USD/KRW upward trend that started in 2021, with South Korea's record current account surplus given as the driver behind the change in view.
Which investors benefit from a stronger won?
Foreign investors holding Korean equities benefit most directly, because currency losses have eroded their local-market returns during the won's decline. Korean importers and households also gain, since dollar-priced energy and food become cheaper. Korean exporters lose out, as a weak won had been inflating the won value of their dollar revenue.
What could invalidate HSBC's call?
The main risk is US interest rates staying high, which keeps the dollar's yield advantage intact and sustains demand for it. A narrowing Korean surplus, whether from softer semiconductor prices, weaker Chinese demand or tariffs, would also remove the foundation. Heavy outbound investment by Korean institutions into foreign assets can offset the surplus entirely.
How did US markets close before the report?
At the last trade on Friday 4 September 2026, the S&P 500 tracker SPY closed at $770.19, down 0.39%, and the Dow 30 tracker DIA closed at $534.08, down 0.53%. The Nasdaq 100 tracker QQQ closed higher at $718.96, up 0.18%, a split consistent with markets repricing interest rate expectations.
Sources
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