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South Korean won seen edging higher as exports and hawkish BoK support
Commerzbank cites an August trade surplus near USD 35 billion and expects the KRW to appreciate more gradually after a sharp fall in USD/KRW from 1,550.
Commerzbank says South Korea’s won should benefit from a combination of strong export performance, a large trade surplus, and a hawkish stance from the Bank of Korea. The bank links the support to shifting FX flow dynamics that it expects will allow more of the external surplus to translate into KRW strength.
The firm points to exports rising 68.7% year over year in August, extending the expansion to a 15th consecutive month, with technology-led gains. It also highlights semiconductor exports jumping 209% year over year to USD 46.7 billion, while computer exports rose 420%.
On the macro front, Commerzbank notes headline CPI inflation rose to 3.1% year over year, slightly below the consensus of 3.2% and up from 2.8% in July. It describes the below-consensus print as somewhat reassuring given anticipated base effects tied to last year’s temporary reduction in telecom charges.
For policy, the bank expects the Bank of Korea to stay on hold in October after back-to-back 25 basis point rate hikes in July and August. Commerzbank adds that the tightening tone is unlikely to change because inflation remains above the 2% target, even as it frames KRW moves as more gradual within a defined appreciation range after a sharp USD/KRW drop from 1,550.