Japanese investment bank MUFG forecasts the Korean won will show gradual strength in the second half of the year, with the dollar-won exchange rate projected at 1,520 won in Q3 and 1,500 won in Q4. The forecast is driven by semiconductor-centered economic growth and anticipated Bank of Korea rate hikes. Domestic stock market adjustments and potential slowdown in global artificial intelligence investment are identified as major risk factors constraining won appreciation.
MUFG Projects Won Appreciation to 1,500 Won per Dollar by Q4
According to MUFG's second-half Asia currency outlook report released on the 6th, the dollar-won exchange rate is projected at 1,520 won for Q3 and 1,500 won for Q4. Next year, the rate is expected to decline gradually to 1,480 won in Q1 and 1,460 won in Q2. This indicates the won will continue a moderate appreciation trend.
Q1 GDP Growth Hits 3.8% YoY on Semiconductor Exports
MUFG expects the Korean economy to maintain favorable growth momentum in the second half, sustained by semiconductor-centered expansion. Q1 gross domestic product increased 1.8% quarter-on-quarter, with net exports contributing 1.1 percentage points to the growth rate. Facility investment also rebounded significantly, supporting the growth trend. Year-on-year growth reached 3.8%, the highest level since 2021.
![Korean Quarterly GDP Growth Rate and Contribution by Category]()
Korean Quarterly GDP Growth Rate and Contribution by Category [Source: MUFG]
Government Semiconductor and AI Investment Projects Support Growth Outlook
MUFG assessed that large-scale semiconductor and AI investment projects announced by the government in late June will drive medium- to long-term investment expansion. Samsung Electronics and SK Hynix's new semiconductor production facility investments and AI data center expansion plans are analyzed to strengthen future growth foundations. Memory semiconductor price increases and supply shortages were also cited as factors sustaining export strength.
MUFG Expects Two BOK Rate Hikes in Second Half
The possibility of additional Bank of Korea rate hikes was identified as a factor supporting won strength. MUFG expects the Bank of Korea to raise the base rate twice in the second half, as both growth and inflation show stronger trends than expected. Policy authorities' concerns about Seoul housing market overheating and won weakness were also analyzed as factors supporting a tightening stance.
MUFG stated, "10 of 21 indicators pointing to the Bank of Korea's rate outlook suggest two rate hikes within the next 6 months," forecasting "rates will be raised once each in Q3 and Q4 to ease inflationary pressure and prevent economic overheating."
Foreign Stock Selling Poses Risk to Won Strength
Foreign investors' stock selling and slowdown in semiconductor-related investment spending were identified as risk factors for the won.
![Dollar-Won Exchange Rate vs. Foreign Stock Selling Trends]()
Dollar-Won Exchange Rate vs. Foreign Stock Selling Trends [Source: MUFG]
FAQ
What exchange rate did MUFG forecast for the Korean won in Q4?
MUFG projected the dollar-won exchange rate at 1,500 won for Q4, indicating gradual won appreciation from the Q3 forecast of 1,520 won.
Why does MUFG expect the Bank of Korea to raise rates twice in the second half?
MUFG expects two rate hikes because both growth and inflation show stronger trends than expected, with 10 of 21 BOK indicators suggesting two rate increases within 6 months to ease inflationary pressure and prevent economic overheating.
What are the main risk factors constraining won appreciation according to MUFG?
The main risk factors identified are domestic stock market adjustments, potential slowdown in global AI investment, foreign investors' stock selling, and slowdown in semiconductor-related investment spending.
