South Korean Won: Two-Way Risks Accompany Modest Appreciation – OCBC

Near-term volatility remains high for the Korean Won (KRW), although resilient exports and robust AI-related semiconductor demand support a constructive medium-term outlook as USD strength eases. OCBC strategists Sim Moh Siong and Christopher Wong forecast USD/KRW at 1320 by end-2026 and 1260 by end-2027, pointing to moderate Won appreciation along an uneven path. The currency’s high-beta characteristics, elevated US yields and the possibility of further Fed rate hikes remain sources of near-term volatility.

Can the Won recover despite an uneven path?

"Recovery bias but unlikely a straight line. We expect KRW to appreciate moderately into 2027, with USD/KRW projected at 1320 at end-2026 and 1260 at end-2027. The recovery is unlikely to be a straight line, given KRW’s high-beta characteristics and sensitivity to global risk sentiment and portfolio flows."

"Korea’s export resilience and continued strength in AI-related semiconductor demand should provide support, while expectations for hawkish Fed repricing to unwind and USD strength to moderate reinforce our medium-term constructive bias."

"Near term, however, still-elevated US Treasury yields and expectations of another Fed hike could sustain two-way volatility, while resident overseas investment flows may continue to complicate KRW’s response to equity market strength."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)