Won forecast to strengthen after Democrats sweep US midterms

The won is expected to strengthen against the dollar after Democrats swept both chambers of Congress in the US midterm elections, according to Korean economists cited by The Korea Times on 4 November. Democratic control is expected to complicate President Donald Trump's tax cuts and expanded spending plans and to give lawmakers more power to scrutinise his administration.

The midterm effect

Shin Se-don, an economics professor at Sookmyung Women's University, said a fierce confrontation between Congress and the White House is inevitable. That clash could slow growth across the US economy. He argued that a market correction would make US financial assets less attractive and weaken the dollar. The won has already been climbing. The monthly average fell from 1,527.95 won per dollar in June to 1,335.70 in October, according to Bank of Korea data.

What a stronger won changes

Kim Dae-jong, a business administration professor at Sejong University, said a weaker dollar would cut Korea's import costs for crude oil and raw materials. That would ease energy and food inflation. A stronger won, though, hurts exporters by reducing the won value of dollar-denominated earnings.

The Bank of Korea held its policy rate at 3% in October while it assessed two earlier increases. It cited uncertainty about "the degree of expansion in the semiconductor sector and its spillover onto domestic demand".

Exports and the rate case

October exports rose 93.7% year on year to $115.28 billion, the fastest growth since January 1974, according to the trade ministry. September's gain was 83.7%.

Semiconductor exports jumped 259.4% and computer exports 496.6%, as global technology companies kept spending on computing infrastructure for artificial intelligence. Shipments reached $930 billion in the first 10 months of 2026, above $900 billion for the first time, according to Korea Customs Service data. Year-to-date exports are up 57% in South Korea, against 44% in Taiwan and 21% in China, according to Bank of America's analysis. The trade ministry also credited calendar effects: differences in the timing of the Chuseok holiday gave October more working days than a year earlier. President Lee Jae Myung said the country was within reach of $1 trillion in annual exports.

Imports rose 36% year on year to $72.78 billion, the fastest growth since January 2022. The trade surplus narrowed to $42.50 billion from $49.97 billion in September.

Bank of America's rate case

Bank of America said the key macro question is why the same external shock is producing different domestic effects, and how fiscal and monetary policy will respond. It says domestic spillovers and positive output gaps add to inflation pressures in Korea and Taiwan, supporting further rate hikes. It expects Taiwan to see the largest domestic spillover, followed by Korea, because of the size of each tech sector and capacity constraints. The export boom is lifting fiscal revenues in all three economies and funding transfers and investment in Taiwan and Korea, the bank says. China faces the opposite call, with softer domestic demand pointing to more monetary easing.

The currency does not move on trade figures alone. The won weakened 0.71% to 1,343.09 per dollar on Monday despite the export surge.

What happens next

Kim Dae-jong warned that the won could reverse and weaken over the longer term if semiconductor export momentum fades. He also said a loss of momentum in US AI support policies under a Democratic-controlled Congress could weigh on Korea's chip exports.