Daesin Securities economist Lee Jung-hoon forecasts the USD-KRW exchange rate will move within a 1,460 to 1,560 won range by year-end as won weakness passes its short-term peak. The projection comes as dollar strength momentum slows in the second half and foreign investor selling conditions in Korean stocks improve. Lee stated in a report released on the 13th titled 'Stability Phase After Anxiety' that exchange rate rise expectations will calm after foreign exchange authorities intervened above the 1,550 won level.
Three Factors Drove First-Half Won Weakness
Lee identified three factors that drove USD-KRW exchange rate increases in the first half of the year: dollar strength triggered after the Middle East war, foreign net selling of Korean stocks, and yen weakness. The economist noted that if foreign stock selling decreases in the second half, further USD-KRW declines can be expected. However, considering bargain-hunting sentiment, the exchange rate is unlikely to fall to the April low of around 1,440 won.
SK Hynix ADR Listing Identified as Major Near-Term Variable
The SK Hynix Nasdaq American Depositary Receipt (ADR) listing on the 10th was identified as the biggest short-term variable in recent foreign exchange market supply and demand. Lee explained that the $26.5 billion issuance amount will likely be converted to won for domestic investment execution in the second half. This amount represents half of last year's annual foreign purchases of Korean securities and exceeds the annual investment in the United States. Lee stated that if even half of this amount is converted, the exchange rate could fall by several tens of won in the short term, noting it can play a major role in calming exchange rate rise expectations prevalent in the foreign exchange market.
Long-Term Won Value Tied to Korea's Growth Trajectory
Lee diagnosed Korea's economic growth path as the core variable for won value over the medium to long term. He explained that the relationship between the won and economic indicators such as the trade balance has weakened as domestic investors' overseas investment patterns changed after the pandemic, and Korea's structural growth slowdown may be the fundamental background for won weakness. The economist projected that the Bank of Korea's rate-cut cycle will begin in the second half, narrowing the domestic-foreign interest rate inversion. Lee emphasized that what matters is not simply the Bank of Korea cutting rates this year and next year, but whether Korea's growth trajectory itself changes and how long the central bank can maintain high interest rates. He stated that if recently announced large-scale semiconductor investment projects succeed, they could become an inflection point that changes the growth trend itself, in which case won value could show considerable long-term strength. However, Lee noted that contrary to expectations, there are more structural factors for the exchange rate to rise in reality, and the USD-KRW floor has steadily risen during the approximately six-year rise since the pandemic, which may have entrenched exchange rate rise expectations. He added that breaking this trend itself is the priority in the short term.
FAQ
What is Daesin Securities' forecast for the USD-KRW exchange rate by year-end?
Daesin Securities economist Lee Jung-hoon forecasts the USD-KRW exchange rate will move within a 1,460 to 1,560 won range by year-end. The projection is based on dollar strength momentum slowing in the second half and improving foreign investor selling conditions in Korean stocks.
How could the SK Hynix ADR listing impact the exchange rate?
The SK Hynix Nasdaq ADR listing on the 10th with a $26.5 billion issuance amount is identified as the biggest short-term variable in foreign exchange market supply and demand. Lee stated that if even half of this amount is converted to won for domestic investment, the exchange rate could fall by several tens of won in the short term.
