USD/KRW: Scope for the recent move higher to extend as far as 1200 – Credit Suisse

In South Korea, recent DRAM and computer memory manufacturers’ woes bias risks for further USD/KRW upside to as far as 1200, according to economists at Credit Suisse.

New drama for the won

“Industry analysts are now concerned about elevated memory inventories, leading to downgrades of DRAM spot price forecasts. They argue that the sector is now ‘late cycle,’ and this argument has led to falls in share prices for South Korea’s blue-chip tech manufacturers.” 

“Unwinds of foreign-held Korean equity portfolios could continue, which make us cautious on the won. Prior positioning in this consensus equity long suggests that new inflows are unlikely. But we also think that the surge in outflows is behind us, and that USD/KRW could struggle to break above 1,200.” 

“USD/KRW could struggle to break through the key 1,200 level, particularly with the central bank capping exchange rate swings, and with an expected seasonal uptick in the trade surplus in September. However, we do think that foreign investors will remain on the side-lines, and will not ‘buy the dip’ in Korean DRAM manufacturers until there is more clarity on the memory cycle, pricing and inventory levels.”