South Korean Won: Flow reversal case builds – Societe Generale

Societe Generale strategist Kiyong Seong has become more constructive on the USD/KRW pair, suggesting recent strength in the South Korean Won has been fueled by late-stage flow factors rather than solid fundamentals. Seong recommends accumulating long USD/KRW positions, aiming for a 1,470 target within the next few months. Key drivers of this shift include the waning ADR and shipbuilder hedge flows, as well as the potential resurgence of Korean retail investors in US equities.

Seong notes that the USD/KRW exchange rate has exhibited atypical behavior and heightened volatility compared to traditional market drivers, indicating a dominant flow influence over macroeconomic fundamentals. Currently, flow-related drivers that have been pressuring USD/KRW, such as SK Hynix ADR flows and shipbuilders' FX hedge flows, remain the primary catalysts.

However, the strategist believes these factors may be reaching a late-stage phase, which could increase the risk of a reversal. For now, Seong maintains a bullish outlook on the USD/KRW pair, encouraging investors to build long positions with the target of 1,470 over the coming months.