South Korea’s current account balance rose to 23.19B in February. This was up from 13.26B in the previous period.
The sharp rise in South Korea’s current account surplus is a strong bullish signal for the South Korean Won. This massive inflow of foreign currency puts direct upward pressure on the KRW against the US dollar. We should therefore consider positioning for a lower USD/KRW exchange rate in the coming weeks by buying Won call options or selling USD call options.
Trade Surplus Supports Equity Upside
This surplus is not an anomaly, as March’s preliminary trade data showed semiconductor exports surged by over 40% year-over-year, their eighth consecutive month of growth. A robust export sector directly boosts the earnings of major companies listed on the KOSPI index. This makes buying KOSPI 200 index futures an attractive trade to capture the broad market upside.
Such a strong external position gives the Bank of Korea more flexibility to keep interest rates firm to combat inflation, which is still hovering just above their 2% target. We remember how the BOK’s hawkish stance in late 2025 stabilized the currency during a period of global uncertainty. Therefore, the risk of a sudden dovish pivot that could weaken the Won appears low for now.
From an equity derivative standpoint, implied volatility on the iShares MSCI South Korea ETF (EWY) has been steadily declining. This makes buying call options on the ETF a cost-effective strategy to gain exposure to the strengthening Korean market. We see this as a better risk-reward than last year, when concerns over global supply chains in mid-2025 kept volatility elevated.
