The US dollar versus the South Korean won (USD/KRW) is an intriguing currency pair for forex traders. As the 13th most traded currency pair globally, USD/KRW offers unique opportunities thanks to South Korea’s export-driven economy and close ties to the United States. This article will provide a comprehensive overview of USD/KRW, analyzing the factors that impact its price action, volatility, trading strategies, and more.

Introduction to USD/KRW

The USD/KRW pairing pits the world’s primary reserve currency, the US dollar, against the won from Asia’s 4th largest economy. It is considered a minor pair given South Korea’s relatively small economy compared to heavyweights like China and Japan. Nevertheless, USD/KRW is popular for its steep liquidity and sharp daily movements.

Traders are drawn to USD/KRW for its high volatility stemming from South Korea’s reliance on exports and susceptibility to global economic forces. As an exporting powerhouse, South Korea’s economy is heavily dependent on the global economy and trade flows. This sensitivity leads to larger reactions in the won when turmoil hits global markets.

Below we will explore what moves USD/KRW exchange rates, examining everything from monetary policy divergences to trade flows and risk sentiment. Keep reading to gain a deeper perspective on trading this currency pair.

What Impacts USD/KRW Exchange Rates?

Multiple macroeconomic factors drive fluctuations in the USD/KRW exchange rate on a daily basis. Here are some of the most important drivers to watch:

Monetary Policy Divergence

Diverging monetary policies between the US Federal Reserve and Bank of Korea are a primary catalyst behind USD/KRW price action. When US interest rates climb faster than Korea’s, the dollar strengthens against the won. This was evident during tightening cycles in 2015 and 2018. The opposite effect occurs when Korea hikes rates more aggressively, as seen in 2010 and 2011.

Risk Sentiment

The won is a typical “risk-on” currency that strengthens when global growth prospects improve and weakens during periods of risk aversion. In contrast, the safe-haven dollar tends to rise when markets grow jittery. This inverse relationship amplifies volatility in USD/KRW, causing it to swing on shifts in investor sentiment.

Trade Flows

As a heavily export-dependent economy, South Korea’s trade flows substantially impact the won’s value. Exports account for over 40% of Korean GDP, meaning that improved trade competitiveness and overseas demand strengthens the won against the dollar. Meanwhile, any global slowdown that curtails Korean exports will weigh on USD/KRW.

Economic Growth Differentials

Diverging economic fortunes between the US and South Korea also sway USD/KRW rates. Robust US growth that allows the Fed to hike rates sharply can propel dollar strength. Meanwhile, faster Korean economic expansion gives the won a relative boost, especially if it prompts the BOK to follow with rate increases.


Rising geopolitical tensions, often related to North Korea, tend to spur won weakness as global uncertainty mounts. This dynamic was clear in 2017 when nuclear tensions flared up, causing USD/KRW to spike higher. The won also weakens during periods of stock market uncertainty and external crises.

USD/KRW Volatility and Trading Times

USD/KRW is open for trading 24 hours a day from Monday morning in Asia to Friday afternoon in New York. But certain hours see significantly higher volatility and trading volumes:

  • Korean Trading Hours – USD/KRW sees heightened activity when South Korean markets are open from 9 pm to 6 am EST. Korean economic data and monetary policy decisions impact the won during this time.
  • Japanese Overlap – The Tokyo open from 7 pm to 9 pm EST overlaps with Korea and often sparks big moves in yen crosses like USD/KRW.
  • US Session – The US morning between 8:30 am to 11 am EST generates volatility for USD/KRW around major US data releases, Fedspeak, and stock market moves.
  • London Close – Some volatility often occurs around 11 am EST as London trading wraps up and forex positioning adjusts.

Other than Friday afternoons, USD/KRW generally lacks a dominant trading session. Instead, volatility clusters around news events and Korean/Japanese trading activity. Traders should focus on these hotspots while following key global risk themes that drive broader won sentiment.

Trading USD/KRW: Strategies and Analysis

When trading USD/KRW, it helps to focus your technical and fundamental analysis on the dynamics covered above. Here are some key tips for analyzing and trading USD/KRW:

  • Follow US-Korea interest rate differentials and monetary policy outlooks as a primary driver. Hiking cycles create sustained moves.
  • Monitor Korean exports and global demand closely. Improving trade flows boost the won while softness does the opposite.
  • Watch US data and yields for hints at Fed tightening, which tends to lift USD/KRW.
  • Use risk-on/risk-off signals like US stocks, high-yield bonds, and the Japanese yen to gauge USD/KRW direction.
  • Around Korean data or policy decisions, be cautious of volatility and potential stop loss hunting.
  • Respect technical levels on the daily and 4-hour charts, fading extensions and trading breakouts.
  • Be alert to geopolitical tensions around North Korea, joining long USD/KRW trades if volatility spikes on these events.
  • Capture larger moves by tracking long-term trends and utilizing options strategies.

As for technical strategies, USD/KRW price action respects major moving averages like the 50 and 200-day. These often provide dynamic support and resistance. In addition, the overnight range sets the tone for the Tokyo and US sessions.

Playing breakouts of overnight ranges in the direction of the longer-term trend often yields profitable trades. But stale moves that simply fill the prior day’s price extremes should be avoided, as they often reverse.

Trading USD/KRW: Platforms and Tools

When trading USD/KRW, it’s critical to use a platform equipped for the job. Here are some key features to look for:

  • Ultra-Low Spreads – The pip spread is the transaction cost on each trade, so low spreads reduce overall trading expenses. Leading brokers offer USD/KRW with spreads from 0.4 pips.
  • Stable Liquidity – Abundant liquidity ensures solid fill rates on orders. Advanced execution reduces slippage for USD/KRW trades even during volatile events.
  • Competitive Leverage – USD/KRW trades well with leverage up to 200:1, allowing smaller accounts to manage adequate position sizes. Check leverage and margin requirements.
  • Diverse Order Types – Use stop losses and take profits to manage risk on each trade. Bracket orders allow automating this process. Use limit orders to trade breakouts confidently.
  • Advanced Charting – Trading USD/KRW requires comprehensive charting with indicators and analysis tools. Look for customizable charts with price alerts, trendlines, and overlay capabilities.
  • Economic Calendar – Stay on top of high impact events with a built-in economic calendar that deliverstrading alerts right on the platform.
  • Mobile Access – Trade USD/KRW from anywhere via iOS and Android mobile trading apps. This allows you to manage trades on the go.

By trading with a trusted broker, you can gain reliable USD/KRW access with optimal trading conditions. Just be sure to employ risk management for this volatile pair.

Long-Term Outlook and Key Trading Levels

Since markets price currencies based on relative fundamentals, the long-term USD/KRW outlook depends largely on the divergent economic and policy trajectories between the US and South Korea.

Heading into 2023, USD/KRW remains biased higher based on the following dynamics:

  • The Fed is still hiking rates aggressively to tame high US inflation. This tightening cycle should continue lifting the dollar.
  • Meanwhile, the BOK has begun cutting rates to boost weak Korean growth. This monetary policy divergence favors the greenback.
  • Sluggish global demand poses an ongoing headwind for South Korean exports.
  • Risk appetite faces pressure from elevated recession risks worldwide.

However, any indications of the Fed pausing rate hikes could spark won strength. USD/KRW also looks overbought on longer-term charts, signaling potential for a correction.

Key levels to watch:

  • Resistance: 1,450, 1,500, 1,540
  • Support: 1,350, 1,300, 1,250

Traders should watch price action around these levels for clues on USD/KRW direction. In particular, a break above resistance signals upside momentum, while a drop below support points to building weakness.

Final Thoughts

While often overlooked, USD/KRW is a worthwhile pair for forex traders to have on their radar. It provides unique opportunities stemming from South Korea’s export-led economy and sensitivity to macroeconomic forces. But by understanding what moves USD/KRW and utilizing the right trading strategies, one can effectively trade this volatile pair.

The next time global risk appetite wanes or the US and Korea enter diverging rate hike cycles, consider taking a position in USD/KRW. Just be sure to employ prudent risk and money management practices given its penchant for large swings. Monitoring the levels and themes covered in this article should set you on the right path for trading success.