Hanwha Investment & Securities analyst Choi Gyu-ho forecasts the USD-KRW exchange rate will decline in H2, ranging between 1,430-1,550 won. This outlook reflects the passing peak of external negative factors that pressured the currency pair higher in the first half, including the US-Iran war, Federal Reserve rate hike concerns, and record yen weakness. Choi's analysis, released on the 7th, suggests that easing external tensions combined with domestic policy initiatives and positive economic trends could drive the exchange rate lower in the second half.
Fed Rate Hike Concerns Expected to Subside in H2
Choi Gyu-ho anticipates that Federal Reserve rate hike concerns will diminish in the second half. He attributes this expectation to international oil prices stabilizing faster than anticipated and US employment growth slowing moderately, which could reduce the Fed's perceived urgency to raise rates. "While it's still premature to expect rate cut expectations to emerge, this is the variable that will contribute most significantly to exchange rate decline among various external issues," Choi stated in the report.
Yen Weakness Pressure to Ease Without Strong Rebound
Regarding the Japanese yen, Choi expects weakness pressure to somewhat calm but notes that a clear shift to strength will be difficult. He cites the persistent interest rate differential with the United States and Japan's expansionary fiscal stance as factors preventing a pronounced yen recovery.
Domestic Factors Support Won Strength
Choi identifies several domestic factors as drivers of won strength. These include continued strong semiconductor export performance and the Bank of Korea's expected 50 basis point rate increase to 3.00% within the year. The analyst also views the government's announced "3 Major Mega Projects" and SK Hynix's American Depositary Receipt listing in the US as positive factors for dollar supply conditions.
24-Hour FX Trading Marks Efficient Market Entry
Choi assessed the 24-hour trading that began the previous day as "laying the foundation for Korea's foreign exchange market to enter as an efficient market." He acknowledged that "while there is a risk of temporary excessive price reactions during nighttime hours when liquidity is insufficient, as market depth increases, long-term exchange rate volatility can gradually shrink and settle into a stable trajectory."
July USD-KRW Range Set at 1,490-1,550 Won
For the current month, Choi provided a USD-KRW exchange rate range of 1,490-1,550 won. He determined the short-term upper limit at 1,550 won, taking into account the possibility of verbal intervention by foreign exchange authorities.
FAQ
What is Hanwha Investment & Securities' forecast for USD-KRW in the second half?
Hanwha Investment & Securities analyst Choi Gyu-ho forecasts the USD-KRW exchange rate will range between 1,430-1,550 won in the second half, representing a gradual decline from current levels as external negative factors that drove the rate higher in the first half pass their peak.
Why does the analyst expect Fed rate hike concerns to diminish?
Choi Gyu-ho expects Fed rate hike concerns to subside because international oil prices are stabilizing faster than anticipated and US employment growth is slowing moderately, reducing the Federal Reserve's perceived need to raise rates in the near term.
What domestic factors support won strength according to the report?
The report identifies continued strong semiconductor export performance, the Bank of Korea's expected 50 basis point rate increase to 3.00% within the year, the government's "3 Major Mega Projects," and SK Hynix's American Depositary Receipt listing as domestic factors supporting won strength.
