Commerzbank FX analysts Charlie Lay and Moses Lim report that the South Korean Won (KRW) has appreciated nearly 15% against the US Dollar since late June, a move attributed less to the current account surplus and more to structural shifts in capital flows. These shifts include increased FX hedging by the National Pension Service (NPS), corporate American Depositary Receipt (ADR)-related repatriation, and robust fundamentals backed by the Bank of Korea (BoK) [1].
The BoK projects the current account surplus to reach a record USD 450 billion in 2026 and remain elevated at USD 430 billion in 2027, primarily driven by a boom in semiconductor exports. Additionally, the BoK's back-to-back rate hikes and ongoing tightening bias are cited as providing further support for the KRW [1].
Despite these supportive fundamentals, Commerzbank analysts believe that the 'easy gains may be behind us' following the recent sharp rally. They expect the USD/KRW exchange rate to consolidate in the 1,330–1,380 range in the near term, as authorities are likely to temper further appreciation. The analysts anticipate that any additional KRW appreciation will be more gradual going forward [1].
CONCLUSION
The South Korean Won's strong rally appears set to slow, with further gains expected to be more gradual as supportive fundamentals are balanced by structural flow shifts and policy moderation. Market participants should anticipate consolidation in the USD/KRW range of 1,330–1,380 in the near term, according to Commerzbank analysts.