Bias: Bearish-to-range-bound, as the KRW is below the 90-day average and within the lower half of the 3-month range.
Key drivers:
• Rate gap: The Bank of Korea continues to express concerns about inflation tied to a weak KRW, contrasting with the Federal Reserve's more accommodative stance, which could support the USD.
• Risk/commodities: With oil prices fluctuating, any rise could further weaken the KRW by increasing import costs, while stable or falling prices might offer some respite.
• Potential Impact of Retail Investors: The increase in South Korean retail investors holding U.S. stocks suggests elevated demand for the USD, contributing to the KRW's ongoing depreciation.
Range: The KRW/USD is expected to drift within its recent 3-month range, possibly testing the lower end if current pressures persist.
What could change it:
• Upside risk: A more hawkish tone from the Federal Reserve could strengthen the USD further.
• Downside risk: A significant stabilization measure from the South Korean government could help support the KRW against the USD.