USD/KRW Outlook:
The USD/KRW outlook is slightly positive, but likely to move sideways as the rate is currently just below its recent average and trading in a tight range.
Key drivers:
• Rate gap: The interest rate gap between the US Federal Reserve and the Bank of Korea is widening, favoring a stronger USD.
• Risk/commodities: Recent volatility in oil prices has pressured the KRW, which historically weakens the currency when oil costs are high.
• One macro factor: The Bank of Korea has raised concerns about the impact of a weak KRW on domestic businesses and inflation, indicating possible actions to stabilize the currency.
Range:
The USD/KRW rate is likely to hold within its recent 3-month range, drifting around current levels.
What could change it:
• Upside risk: A significant US economic report showing robust growth could strengthen the USD beyond its current levels.
• Downside risk: Effective intervention by South Korean authorities to stabilize the KRW could lead to a stronger won.