KRW/USD Outlook:
Bearish, as the KRW is below its recent average and facing pressure from ongoing government measures to stabilize the currency.
Key drivers:
- Rate gap: The Bank of Korea has expressed concern over KRW weakness, as the USD is supported by a stable Federal Reserve, making the KRW less attractive.
- Risk/commodities: The recent depreciation of the KRW is likely to contribute to rising inflation in South Korea, affecting economic stability.
- One macro factor: Global geopolitical tensions are causing a shift away from U.S. assets, weakening the appeal of the USD against the KRW amid uncertainty.
Range:
The KRW/USD is expected to move within a stable range, potentially testing recent lows.
What could change it:
- Upside risk: A significant improvement in U.S. economic data could boost risk appetite for the USD.
- Downside risk: Further government intervention to limit KRW volatility may exacerbate weakness in the KRW.