HSBC strategists have declared an end to the dollar-won uptrend that began in 2021, attributing the shift to South Korea's record current account surplus this year. In a September 7 report, Asia FX research head Joey Chew detailed the bank's revised forecasts, cutting its dollar-won projections for end-2026 and mid-2027 to 1320 and 1280, respectively, down from a previous estimate of 1500.

Based on data from January through July, the current account surplus is running at an annualized pace of $400 billion—a development described as "game-changing" for the exchange rate. This figure surpasses the cumulative $360 billion surplus recorded over the 2021-2025 period.

The booming artificial intelligence and chip sectors are expected to generate stronger domestic spillover effects through substantial capital expenditures, employee bonuses, shareholder returns, and tax contributions. The resulting currency conversion, combined with the Bank of Korea's 50-basis-point policy tightening since July and ongoing fiscal consolidation, should offer structural support for the won.

Should de-dollarization accelerate or the yen stage a sustained recovery, the won's appreciation could quicken, introducing additional upside risks. Conversely, the primary downside risk lies in a sudden halt to the AI boom, which could erode Korea's concentrated trade surplus and trigger large-scale equity outflows.

Despite the bullish outlook for the currency, the path ahead is unlikely to be smooth. Larger and less predictable foreign exchange flows from corporates, foreign investors, local participants, the National Pension Service, and the official sector are expected, while dollar-won short positions have already reached extreme levels.