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USD/KRW seen ranging as South Korean inflation supports BoK hike

Commerzbank expects USD/KRW to trade around 1500 to 1520 as oil moves and risk sentiment shift ahead of the 16 July Bank of Korea decision.

Reported · Written up by our desk · EM Currencies

Elevated South Korean inflation is strengthening expectations for a Bank of Korea rate hike, with Commerzbank arguing the central bank is positioned to raise borrowing costs by 25 basis points to 2.75% at its 16 July meeting, according to an FXStreet note citing Charlie Lay.

The view is supported by June inflation, which rose to 3.2% year over year from 3.1% in May, the highest reading since December 2023, and remained above the BoK’s 2% target, the note said. Commerzbank also pointed to exports surprising to the upside amid booming semiconductor demand.

On the currency side, USD/KRW has fallen from around 1560 to 1506 over the prior two weeks as oil weakened, the note said. It expects the pair to move in a 1500 to 1520 range, with the dollar, global risk sentiment, and geopolitical developments highlighted as key drivers.

The note said a rebound in oil prices could limit further USD/KRW declines, reinforcing oil as the near term catalyst for the exchange rate.

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