The USD to KRW exchange rate is currently under pressure due to a combination of domestic and international factors influencing both currencies. Analysts observe that the US dollar (USD) has weakened recently as traders anticipate aggressive Federal Reserve rate cuts in 2026, suggesting a shift in market sentiment from inflation management to monetary easing. This expectation has diminished the relative yield advantage of the USD, contributing to its decline. The USD recently hovered around 1469 KRW, which is significantly above its three-month average of 1433 KRW.
On the Korean side, the South Korean won (KRW) has faced depreciation, weakening over 4% against the USD this quarter. The country's consumer price index (CPI) rose to 2.4% year-on-year, surpassing the Bank of Korea's (BOK) target, which prompts concerns about inflation and leads the BOK to maintain its policy rate at 2.50%. This decision reflects a cautious stance amid rising inflationary pressures and currency valuation concerns.
Despite these challenges, the recent US-South Korea trade agreement may provide some stabilization; however, economists warn of potential capital outflows that could further weaken the KRW. Furthermore, the BOK has implemented reforms to enhance market liquidity and reduce volatility, signaling a proactive approach to currency management.
Given the current environment, forecasters expect the USD to KRW exchange rate to remain in a relatively stable range, influenced by ongoing adjustments in monetary policies on both sides and global risk sentiment. The market is looking ahead to upcoming economic indicators and Fed communications, which could sway the exchange rate further. The overall forecast suggests that a sustained 'risk-on' attitude among investors may limit the USD's upside potential against the KRW in the near term.
