South Korean Won: Rate hikes and undervaluation support KRW – BNY

BNY’s Geoff Yu highlights that the Bank of Korea’s 25bp hike to 3.00% and upgraded growth and inflation forecasts underline ongoing tightening risks. Robust exports and investment are supporting the economy, though stronger demand could fuel inflation and household debt. Yu continues to see undervalued APAC (Asia-Pacific) currencies such as South Korean Won (KRW) as preferred vehicles for expressing potential US Dollar (USD) weakness.

BoK tightening underpins Korean won

"The BoK raised its policy rate by 25bp to 3.00%, delivering a second consecutive hike as strong semiconductor demand lifts growth and adds to inflation pressure. The BoK raised its 2026 GDP forecast to 3.3% from 2.6% and its 2027 forecast to 2.9% from 2.1%; core inflation projections were also revised higher to 2.5% for both years."

"Policymakers highlighted robust exports, investment and gradually improving consumption, but warned that stronger demand could reinforce inflation, housing prices and household debt. The won strengthened after the decision, while the Kospi also rose. The BoK’s projections point to further tightening, though at a slower pace, suggesting the focus is shifting from front-loaded hikes toward more measured normalization."

"We continue to see undervalued APAC currencies such as KRW as the best expression of potential dollar weakness, rather than G10 names."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)