KRW/USD Outlook:
The KRW/USD outlook is likely to decrease as the South Korean Won remains below its recent average and has been trading near recent lows. Factors such as ongoing currency weakness and a widening interest rate gap with the US are putting pressure on the KRW.
Key drivers:
• Rate gap: The widening interest rate gap between the Bank of Korea and the Federal Reserve continues to weaken the KRW relative to the USD.
• Risk/commodities: Increased safe-haven demand for the USD, driven by geopolitical tensions, adds further pressure on the KRW.
• Macro factor: The Bank of Korea's concerns about excessive KRW weakness harming domestic businesses indicate potential policy shifts that may support the USD.
Range:
The KRW/USD rate is likely to drift within its recent range, but the ongoing challenges suggest it could test further lows.
What could change it:
• Upside risk: A significant shift in US economic indicators that signals slower growth might boost the KRW.
• Downside risk: Continued geopolitical instability could drive more investors towards the USD, further weakening the KRW.
