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    Korea’s industrial production rebounds, indicating strong exports and potential budgetary support risks

    by VT Markets
    /
    Jan 31, 2026
    Korea’s industrial production grew in December, indicating strong export growth. This has helped the Korean won (KRW) rise against the U.S. dollar (USD) this week. President Lee has proposed a supplementary budget. This budget could benefit sectors like culture, arts, and new startups.

    Possible Budget Implications

    The budget might be funded through issuing Korea Treasury Bonds or increasing tax revenues. This could improve Korea’s growth outlook, in line with the Bank of Korea’s recent neutral position. Reflecting back, we remember discussions in early 2025 about a potential supplementary budget and its positive effects on the Korean won. That budget was approved in the second half of the year and led to a 12% increase in tech exports in the third quarter of 2025. This initially strengthened the won, reducing the USD/KRW pair to around 1,330 last autumn. However, positive feelings faded as global growth worries grew towards the end of 2025. The latest December 2025 industrial production data showed a surprising 0.4% month-over-month decline, contrary to expectations of continued growth. This slowdown indicates that the previous boost from exports may be weakening as we enter the new year.

    Risk Profile and Currency Implications

    In the upcoming weeks, the risk profile has shifted compared to most of 2025. With the USD/KRW trading close to 1,390, traders should consider that the trend may be upward. Buying USD/KRW call options could be wise for those expecting further weakness in the won, particularly with a strike price around 1,410. The Bank of Korea’s change to a neutral stance was a major topic last year, but that viewpoint is now being reevaluated. Inflation has decreased, with consumer prices rising only 2.3% year-over-year in the fourth quarter of 2025, much lower than previous peaks. This change raises the likelihood of a rate cut by mid-2026, which could increase pressure on the dollar-won exchange rate. Create your live VT Markets account and start trading now.

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