Economists at Société Générale expect the USD/KRW pair to edge higher towards 1,160 by end-2021 as the Korean won is no longer to benefit from strong exports as in the past year.
Buy USD/KRW on dips
“We have revised up our USD/KRW forecast to 1,160 by year-end and 1,200 in 2Q22.”
“The consumption shift in developed markets to services from goods will likely continue and be modestly negative for major exporters’ currencies, including the won.”
“We also believe that the widening interest rate differential (IRDs) theme is unlikely to strengthen the won. The relationship between IRDs and USD/KRW is weak. Therefore, we do not think that the BoK hiking policy rates in advance of the Fed will strengthen the won.”
“If an imminent BoK hike lowers USD/KRW below 1,140, it would be an opportunity to buy USD/KRW on dips. Foreign equity flows tend to affect USD/KRW more, and we see no compelling reasons for foreign investors to aggressively accumulate Korean equities.”
“Without stronger growth momentum than in the US, it would be reasonable to expect USD/KRW to grind higher from current levels, in line with the CNY.”
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