South Korean Won: Stable Fed and AI demand support KRW against US Dollar – ING
ING economists Deepali Bhargava and Lynn Song highlight a sharp 8% drop in USD/KRW earlier in the second quarter, driven by temporary flows such as Hynix ADR repatriation and National Pension Service hedging adjustments, alongside a hawkish Bank of Korea (BoK) hike.
ING economists Deepali Bhargava and Lynn Song attribute a significant 8% decline in the USD/KRW exchange rate at the beginning of the second quarter to temporary factors. These factors include Hynix repatriating $16 billion in ADR receipts and the National Pension Service adjusting hedging ratios. Additionally, the Bank of Korea's (BoK) hawkish interest rate hike in July played a crucial role in this shift.
Despite these temporary influences, Bhargava and Song foresee further tightening from the BoK, which supports the overall strength of the Korean Won (KRW). They emphasize that surging chip exports and significant investment in the AI industry are driving domestic demand, likely keeping inflation above the target for an extended period.
The market currently anticipates another 50 basis points of hikes by the year-end. While the USD/KRW pair exhibits high volatility, with a 12% annualized rate, factors like a stable Fed, hawkish BoK policy, and sustained AI demand are expected to strengthen the KRW.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written; read the original for the full account.
