Part 5 · Exchange rates and exports: the key to the Korean market · Lesson 25
Who benefits from a weak won?
When the exchange rate rises, companies that earn in dollars smile and companies that spend in dollars cry. Put them on a scale, and you can see which way each sector tips.
QToday's question
When the exchange rate rises (the won weakens), why do some companies smile and others cry?
In June 2026, the USD/KRW exchange rate rose to a monthly average of KRW 1,529. In the same period, Korean Air posted a net loss in Q2 because of the exchange rate even though it earned an operating profit, while Hyundai Motor cited a 'favorable exchange rate' as a reason for higher sales in an earnings release a few months earlier. Same exchange rate, opposite results. In this lesson, we put companies on a scale to see how the exchange rate's effect splits depending on which currency a company's money comes in and goes out in.
MAPLearning map for this lesson
We build it up in three steps. At the end of each step, a 'Quick check' lets you test your understanding before moving on.
In Lesson 23 you learned that when USD/KRW rises the won loses value, i.e. 'rising exchange rate = weak won'. In Lesson 24 you saw that interest rate gaps, the trade balance and crisis sentiment move the exchange rate. And in Lesson 2 you confirmed that Korea is a country where exports exceed 41% of GDP. This lesson connects how that exchange rate reaches earnings by sector.
- STEP 1 · Basic conceptsThe same $1, a different amount in won
You can explain with calculations why, when the exchange rate rises, the won revenue of companies that sell in dollars grows and the won costs of companies that buy in dollars increase.
- STEP 2 · Understanding the mechanicsThree paths from the exchange rate to earnings
Splitting into revenue translation, costs and , you can read a company's and judge which way the scale will tip.
- STEP 3 · Real-world applicationFrom the KRW 1,500s to the KRW 1,300s: the 2026 exchange rate
Using the actual exchange rate path and numbers from company filings, you can check which sectors gain or lose, and turn exchange rate news into a sector map.
STEP 1The same $1, a different amount in won
The reason exchange rate news sounds different for each sector is simple: the currency that money comes in and the currency it goes out in differ from company to company.
Easy analogy · Someone paid abroad vs someone who loves overseas online shopping
Imagine someone who gets a monthly salary in dollars from a US company. The $3,000 salary stays the same, but if the exchange rate goes from KRW 1,300 to KRW 1,400, the money landing in the Korean bank account grows from KRW 3.9 million to KRW 4.2 million. Conversely, someone who buys $100 worth of goods through overseas online shopping every month has to pay KRW 140,000 instead of KRW 130,000 for the same items.
Companies are the same. A company that sells in dollars is 'a person paid a dollar salary', and a company that buys raw materials and fuel in dollars is 'a person who shops overseas a lot'.
When the exchange rate rises, exporters' won revenue grows
When the , i.e. when the USD/KRW rises, the same $1 converts into more won. , which sell goods overseas and receive dollars, record revenue in won in their books, so even if they sell the same quantity at the same dollar price, their won increases.
The difference is clear if we calculate for exporting one $30,000 car.
For a company that sells several hundred thousand cars a year, a KRW 3 million difference per car becomes hundreds of billions of won. If costs haven't risen much, most of that difference remains as . Of the two knobs on stock prices you learned in Lesson 1, the 'earnings knob' is being moved by the exchange rate.
You can also cut the price: price competitiveness
There is one more exchange rate effect. Think of a car for which receiving KRW 40 million is enough. At a rate of KRW 1,300, it would have to sell overseas for about $30,800, but at KRW 1,400 it can sell for about $28,600 and still earn the same won. A weak won gives exporters room to cut dollar prices and boost sales, i.e. . The company can choose whether to keep this room as 'profit' or convert it into 'sales volume'.
Importers, in contrast, see costs rise
On the other side are companies that buy raw materials and fuel in dollars and sell them domestically in won. Typical examples are power and gas companies that import crude oil, airlines that pay for jet fuel and aircraft lease fees in dollars, and food and beverage companies that import grains such as wheat and corn. When the exchange rate rises, these companies need more won to buy the same quantity, but it is hard to raise domestic selling prices right away. In the meantime, profit shrinks.
Quick checkA company exports $20,000 machines. If the exchange rate rises from KRW 1,350 to KRW 1,450, how much does the won revenue per machine increase?
STEP 2Three paths from the exchange rate to earnings
Real companies don't 'only export' or 'only import'. They both earn and spend dollars. So you need to put the dollars coming in and the dollars going out on the scale together.
Direction of exposure = dollars coming in − dollars going out
A company whose dollar income exceeds its dollar spending benefits from a weak won, and a company with more dollar spending or dollar debt is hurt. This difference is called net foreign currency exposure.
Let's split it into three paths
1 Revenue translation
Revenue sold in dollars grows or shrinks in won. The larger the export share, the bigger the effect.Reflected in operating profit2 Costs
Raw materials, parts, fuel and lease fees bought in dollars become more or less expensive in won. The larger the share of imported costs, the bigger the effect.Reflected in operating profit3 Foreign currency translation gains and losses
Book gains or losses that arise from recalculating a company's dollar deposits, dollar bonds and dollar debt at the exchange rate on the closing date.Reflected in non-operating itemsThe first and second move operating profit, the profit from the core business. The third, , can shake net income even when no cash changes hands. For a company with a lot of dollar debt, when the exchange rate rises the amount of won owed is recalculated as larger and a loss is recorded; when it falls, a gain is recorded. If a company's operating profit is fine but its net income swings widely, it is worth suspecting this third path.
See it in a picture: the exchange rate scale
We put two hypothetical companies on a scale. On the left is an exporter that receives all its revenue in dollars; on the right is an importer that buys fuel in dollars and also has dollar debt. Move the exchange rate.
Hypothetical exporter A
Dollar revenue $1 billion · dollar costs $200 million- Won revenue
- KRW 1.3 trillion
- Dollar costs (in won)
- KRW 260 billion
- Won costs
- KRW 900 billion
- Operating profit
- KRW 140 billion
Hypothetical importer B
Won revenue KRW 1.3 trillion · dollar costs $600 million · dollar debt $2 billion- Won revenue
- KRW 1.3 trillion
- Dollar costs (in won)
- KRW 780 billion
- Won costs
- KRW 300 billion
- Operating profit
- KRW 220 billion
- Gain/loss on dollar debt
- 0
Same as baseline (KRW 1,300). Move the exchange rate.
The company whose profit grows more than the baseline rises to the top. The sizes and structures of the two companies are hypothetical examples to aid understanding, and the unit is won.
Try tapping 'Weak won · KRW 1,400'. Exporter A's operating profit rises about 57%, from KRW 140 billion to KRW 220 billion, while importer B's falls about 27%, from KRW 220 billion to KRW 160 billion. On top of that, B takes a KRW 200 billion valuation loss from recalculating its $2 billion of dollar debt. A's net foreign currency exposure is +$800 million ($1 billion − $200 million), while B's is −$600 million plus dollar debt, so with every KRW 10 move in the exchange rate, the scale tips in opposite directions.
Devices that make the scale tip less
Real companies use several devices to soften exchange rate shocks. When a company earns in dollars and spends in dollars, the two offset each other, which is called a . Producing and selling in local currency at overseas plants reduces the exchange rate's effect. Companies like shipbuilders, which receive payment over several years after winning an order, sometimes lock in the future exchange rate in advance with forward contracts. That is why sensitivity to the exchange rate differs from company to company even within the same sector.
Common misconceptions
- "When the exchange rate rises, exporter stocks always rise?"
- No. If a competitor's currency, such as the Japanese yen, weakens along with the won, the price competitiveness effect shrinks. If the weak won shows up in a crisis where 'the world economy is bad and money rushes into the dollar', export volumes themselves fall and swamp the exchange rate effect (Lesson 24).
- "A weak won is always good for Korea's economy?"
- Import prices rise and push up consumer prices (Lesson 7), and the amount of imported goods the same salary can buy shrinks. For foreign investors holding won assets it means currency losses, so capital may flow out (Lesson 27).
- "You can see the whole exchange rate effect in operating profit?"
- Foreign currency translation gains and losses are non-operating items, so they don't show up in operating profit. For a company with a lot of dollar debt, you need to look at net income as well to see the exchange rate's effect properly.
Quick checkA company earns $1.5 billion in dollars a year and buys $1.2 billion worth of raw materials in dollars. Does it benefit from a weak won, or is it hurt?
STEP 3From the KRW 1,500s to the KRW 1,300s: the 2026 exchange rate
Now that you know the principle, let's check it with real numbers. The exchange rate has swung widely in recent years, which makes it a good period for seeing differences across sectors.
The path the USD/KRW exchange rate has taken
USD/KRW monthly average (Jan 2021 – Sep 2026)
Tap a dot or move over the graph to see that month's exchange rate.
Source: US Federal Reserve (FRED) EXKOUS USD/KRW monthly average exchange rate. Checked 2026-10-05. Daily highs are above the monthly average (e.g. KRW 1,541.5 at the end of June 2026).
The monthly average USD/KRW rate rose from around KRW 1,100 in early 2021 to KRW 1,426 in October 2022, during the US's rapid rate-hike period. It then stayed in the KRW 1,300s before climbing back into the KRW 1,400s from the end of 2024, and rose as high as KRW 1,529 in June 2026. But from July the direction reversed, and the September average was KRW 1,359, down about 11% in three months. The won strengthened quickly.
Real sensitivity seen in filings
Listed companies state in the 'market risk' section of their business reports how much their profit changes when the exchange rate moves. Looking at the numbers of two companies at opposite ends of the scale confirms the STEP 2 principle in practice.
Hyundai Motor
+KRW 169.8 billion- According to its business report, if the USD/KRW exchange rate rises 5%, pre-tax income increases by KRW 169.8 billion.
- The Q4 2025 USD/KRW average was KRW 1,451.0, 3.9% higher than a year earlier, and the company cited the 'favorable exchange rate' as a reason for higher sales.
Korean Air
About KRW 56 billion per KRW 10- At the end of June 2026, net foreign currency liabilities were about $5.6 billion, so every KRW 10 move in the exchange rate changes foreign currency gains and losses by about KRW 56 billion.
- In Q2 2026, it recorded a net loss despite an operating profit, including a net foreign-exchange-related loss of about KRW 145 billion, and fuel costs rose KRW 133.8 billion from a year earlier due to the higher exchange rate.
Sources: Hyundai Motor '2025 Business Results' (Jan 29, 2026), Hyundai Motor business report exchange rate sensitivity (Chosun Biz report, Mar 31, 2026), Korean Air half-year report and MTN Money Today Broadcasting report (Sep 8, 2026). Checked 2026-10-05. This is not a recommendation to buy or sell any specific stock; it is an example showing sector structure.
The key point is that the two numbers point in opposite directions. In the first half, when the exchange rate was in the KRW 1,500s, the scale tipped in favor of exporters; when it came back to the KRW 1,300s in September, the airline's dollar-debt burden eased while the won translation effect for exporters shrank. However, when prices and volumes explode, as with semiconductor exports in 2026, profits can grow sharply even as the exchange rate falls. In the next lesson, we confirm with export data that the exchange rate is only one of several knobs that move earnings.
Generally favorable with a weak won
Semiconductors · Autos · Shipbuilding · Defense
They have a large share of dollar revenue and a considerable part of their costs in won. When the exchange rate rises, won-translated revenue and price competitiveness both improve. With a strong won, it becomes a burden instead.
Generally unfavorable with a weak won
Airlines · Power and gas · Food and beverage
They pay for fuel, raw materials and lease fees in dollars, and it is hard to raise domestic selling prices right away. Airlines with large dollar debt also face foreign currency translation losses. A strong won gives them breathing room.
Sectors that buy raw materials in dollars and re-export products, such as refining and chemicals, steel, cosmetics and EV batteries, see the two effects mix, so the direction differs by company. The travel sector, which depends on overseas travel demand, tends to be hurt by a weak won because overseas trips become more expensive.
For stocks: turn exchange rate news into a sector map
| Example headline | Look first at | What to check alongside |
|---|---|---|
| "USD/KRW hits highest level in 17 years" | Export sectors won-translated earnings ↑ · Airlines and power costs and valuation losses ↑ | If the exchange rate rose because of a 'crisis', export volumes may fall too (Lesson 24) |
| "USD/KRW plunges KRW 170 in three months" | Airlines, power, food and beverage cost burden ↓ · Export sectors translation effect ↓ | Whether exports are holding up on price and volume (Lesson 26) |
| "Yen weakness accelerates" | Autos and machinery price competition burden versus Japan | Whether the won is weakening too, and whether competing models and markets overlap |
When you see exchange rate news, first ask: "Does this sector earn in dollars, spend in dollars, or borrow in dollars?" You can see how the current exchange rate phase is calculated for each sector in the 'Weak won' row of the impact map on the Macro Map, and the effect the exchange rate has on your returns when you buy overseas stocks in the FX Return Calculator.
It isn't always so. Hedging contracts, the share of overseas production, competitors' currencies and above all product demand can amplify or erase the exchange rate effect. Stock prices sometimes react first to 'expectations of the future exchange rate' rather than to the rate itself (Lesson 20).
Quick checkAn airline has net foreign currency liabilities of about $5.6 billion. If the quarter-end exchange rate falls KRW 200, from KRW 1,541 to KRW 1,341, roughly what happens to its foreign currency gains and losses?
✓What we learned today
- When the exchange rate rises (weak won), the same $1 becomes more won. Exporters that sell in dollars see their won revenue grow, and companies that buy raw materials and fuel in dollars see their won costs rise.
- The exchange rate effect reaches earnings through three paths: revenue translation, costs, and foreign currency translation gains and losses, which recalculate foreign currency assets and liabilities. A company's direction is decided by the difference between dollars coming in and going out, i.e. its net foreign currency exposure.
- In actual filings, Hyundai Motor's pre-tax income increases by KRW 169.8 billion if USD/KRW rises 5%, and Korean Air, with net foreign currency liabilities of about $5.6 billion, sees a valuation gain or loss of about KRW 56 billion for every KRW 10 move in the exchange rate.
- Semiconductors, autos, shipbuilding and defense are generally favored by a weak won, while sectors that buy raw materials and fuel in dollars, such as airlines, power and food and beverage, are generally hurt. For refining and chemicals, the two effects mix.
- The exchange rate is one of the forces that create a sector's 'tilt'. Competitors' currencies, local production, hedging and demand itself can amplify or reduce the exchange rate effect.
You saw that the exchange rate shakes exporters' earnings. So how closely do exports themselves move with the stock market? In the next lesson, we learn how to read the trade statistics released on the 1st of every month, and check with data the ten years that export growth and the KOSPI have traveled together.
Quiz5-question quiz
Pick an answer and it's graded right away with an explanation.
Q1. A company exports $30,000 cars. If the exchange rate rises from KRW 1,300 to KRW 1,400, what happens to the won revenue per car?
Won revenue = dollar revenue × exchange rate. $30,000 × KRW 1,300 = KRW 39 million and $30,000 × KRW 1,400 = KRW 42 million, so it rises by KRW 3 million.
Q2. Which sector is generally hurt by a weak won (a rising USD/KRW rate)?
Airlines pay a large part of their costs in dollars and also have large dollar debt, so when the exchange rate rises, both costs and foreign currency translation losses increase.
Q3. Where are the foreign currency translation gains and losses, which arise from recalculating a company's dollar debt at the closing-date exchange rate, reflected?
Foreign currency translation gains and losses are non-operating items, not profit from the core business. That is why operating profit can be fine while net income swings widely.
Q4. A company earns $500 million a year in dollars and spends $800 million on raw materials and fuel. How does a weak won generally affect this company?
Dollars going out ($800 million) exceed dollars coming in ($500 million), so net foreign currency exposure is −$300 million. When the exchange rate rises, the cost increase is bigger than the revenue increase, so the company is hurt.
Q5. Even with a weak won, exporters' profits may not grow as much as expected. Which of the following is NOT an appropriate reason?
Dollar revenue converting into more won is the 'effect' of a weak won itself. The other three are reasons that reduce or mask that effect.
NextTerms · Next lesson · Related tools
The rate at which the currencies of two countries are exchanged. USD/KRW 1,400 means it costs 1,400 won to buy 1 dollar.
Weak wonWeak wonA rise in USD/KRW, that is, a fall in the value of the won. It is generally favorable for exporters.
ExportsExportsSelling goods and services made at home to other countries. Money from abroad comes in as sales for domestic companies. Korea is a country with a large export share, about 41% of GDP (2023).
RevenueRevenueThe total amount a company earns by selling goods and services. It is the amount before deducting costs.
Operating profitOperating profitProfit from the core business: revenue minus cost of sales and selling, general and administrative expenses.
Foreign currency translation gain/lossForeign currency translation gain/lossA bookkeeping gain or loss that arises from remeasuring a company's dollar deposits, receivables and dollar debt at the closing-date exchange rate. Even without cash changing hands, it is reflected in net income as non-operating gain or loss. A company with a lot of dollar debt books a loss when the exchange rate rises and a gain when it falls.
Net foreign currency exposureNet FX exposureThe amount left after subtracting money going out (import costs, foreign currency liabilities) from money coming in in dollars or other foreign currencies (export revenue, foreign currency assets). If positive, it benefits from a weak won; if negative (for example, an airline with large net foreign currency liabilities), it is hurt.
Natural hedgeNatural hedgeAligning the business structure so that a company earns and spends in the same currency, so the exchange rate effects offset each other. Examples include buying raw materials in dollars and selling products in dollars, or producing and selling locally overseas.
Price competitiveness (exchange rate)Price competitivenessThe room exporters have, when the won is weak, to lower overseas selling prices (dollar prices) while still receiving the same won. The company chooses whether to keep this room as profit or use it to expand sales volume.
Cyclical stockCyclical stockAn industry or stock whose earnings swing widely with the business cycle. Semiconductors, chemicals, steel, autos and shipbuilding are typical examples.
SectorSectorA group of companies in similar businesses, divided into categories such as semiconductors, banks and autos.
This is educational material and not investment solicitation. There is no guarantee that past relationships will repeat in the future.