I shorted $USDKRW at the peak and covered on the rebound. Since re-entering the short, my unrealized gains have continued to grow. With the large leveraged foreign positions previously accompanied by long-KRW FX hedges now largely absent, capital inflows and outflows over the past two months have had little impact on the won. Meanwhile, the Bank of Korea has been strongly encouraging exporters to hedge their FX exposure. The resulting dollar selling has taken the place of strategic hedging by the National Pension Service (NPS), which more or less stopped after USD/KRW reached 1,350. From here, I expect the next leg in USD/KRW to be lower, so I will maintain a small core short until offshore interest picks up. Holding longer-dated positions that benefit from a decline in USD/KRW also makes sense: current-account flows and exporter hedging are expected to increase and persist over the next few years, while the Bank of Korea appears comfortable with a stronger won for now. South Korea also faces a risk of domestic divergence similar to China’s: the energy crisis could weaken domestic fundamentals even as exports continue to boom. The Ministry of Economy and Finance has already expressed concern about rising yields and may conduct open-market operations and bond buybacks if it sees signs of market dysfunction.