USD/KRW Outlook: Slightly positive, but likely to move sideways, as the rate is just below its recent average and lacks a clear driver for change.
Key drivers:
• The Federal Reserve's expected rate cuts in 2026 are contributing to the US dollar's weakness against the won, as markets start to factor in lower yield expectations.
• Despite South Korean economic strength, concerns over the KRW's depreciation have emerged, particularly with warnings from the Bank of Korea about excessive weakness creating inflation pressures.
• Recent capital inflows and government measures may support the KRW and mitigate volatility in the currency.
Range: Movement is likely to hold within the recent range as neither currency shows strong momentum to break extremes.
What could change it:
• Upside risk: A more aggressive US monetary policy shift could strengthen the dollar.
• Downside risk: Significant geopolitical tensions or economic setbacks in the US may lead to renewed dollar weakness.
