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South Korean won rallies as Bank of Korea rate hike outlook firms
Brown Brothers Harriman says the KRW is about 11% undervalued on real effective exchange rate measures and points to a July 16 BoK meeting as a key catalyst.
Brown Brothers Harriman highlighted an extended broad rally in the South Korean won, linking the currency move to Korean equity underperformance that can reduce foreign portfolio rebalancing outflows. The firm said the logic is that as KOSPI exposure weakens, the need for foreign investors to trim positions and repatriate funds diminishes, lowering pressure on KRW.
BBH added that its outlook remains supportive because it views the won as significantly undervalued, citing roughly 11% undervaluation versus a real effective exchange rate trend. The firm also said the Bank of Korea is poised to start hiking rates at its July 16 meeting.
BBH further pointed to structural measures that could support longer-term won demand. It cited a new 24-hour onshore KRW market, along with the South Korean government’s plan to unveil a roadmap for won internationalization at end-July.
The firm said Monday’s launch of 24-hour onshore trading marked a first major step toward that internationalization agenda, reinforcing expectations of improved demand over time. FXStreet published the BBH analysis as part of its market commentary.
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