KRW South Korean Won : Bullish and Bearish Analyst Opinions

The author argues that the Korean won is fundamentally undervalued and suggests the National Pension Service (NPS) should halt its foreign asset purchases as a policy step to support the currency.

Go long the South Korean Won (KRW) based on a Citigroup forecast that the Bank of Korea will hike its policy rate to 3% within the year to combat inflation.

Bloomberg (@business) South Korea’s shorter-maturity bond yields are unlikely to revisit their February highs as the central bank prioritizes steadying markets https://t.co/duidL1FnuB Tweet Link

@ChengWeiChin1 and USD rates a tiny bit higher and KRW has trended down so why not ... they are generating way more cash flow than needed to cover input costs so it becomes a bit of a cash management game. but has to be part of the story

but the puzzle remains -- Korean chips are on fire, supporting the stock market (admittedly with volatility this month given positioning and Korea's exposure to an energy shock) and the current account .... yet the won remains extremely weak 6/6

So the net impulse from Korea's government actions supported the won ... 5/ https://t.co/vNHgWwYEYZ

Brad Setser (@Brad_Setser) replying to @Brad_Setser In January a $13 billion current account surplus wasn't enough to support the won -- the Bank of Korea sold $4b in reserves ... so there were big

Korea is a super interesting case (even before the latest events in the Gulf). Surging current account surplus (10% of GDP), surging domestic stock market and a very weak currency are an unusual combination 1/

The Bank of Korea governor is verbally intervening against further currency weakness, signaling a high probability of official action to strengthen the Won.

The South Korean Won is expected to depreciate further as rising energy costs negatively impact the growth prospects of the energy-importing nation.

The Bank of Korea is explicitly signaling potential intervention to support its currency (KRW), which would put downward pressure on the USD/KRW pair.

The unwinding of H1 2025 hedges is expected to keep the Korean Won currency range-bound.

The Korean Won is undervalued and expected to strengthen, implying downside for the USD/KRW currency pair from the 1430 level.

The Korean National Pension Service (NPS) is actively putting downward pressure on the Korean Won, creating a structural headwind for the currency despite the Bank of Korea's opposing view.

A Bank of Korea official is signaling that the Korean Won's recent strength may be unsustainable or unwelcome, implying potential for a reversal (USD strength vs KRW).

The US Dollar is selling off following the Supreme Court ruling. The "Reciprocal Tariff" threat is gone, replaced by a 15% baseline which is seen as less targeted/severe for specific Asian currencies than the previous regime. The removal of the "worst-case" tariff fears for Asia, combined with the US fiscal blow (weaker USD), creates a relief rally for Asian FX. South Korea specifically shows strong export data (+23.5%), supporting the Won. LONG. Asian currencies are undervalued relative to a US Dollar that just lost a major structural support (tariff revenue). Trump successfully implements a much higher global tariff (above 15%) using emergency powers (IEEPA).

1. THE FACT: If adjustment doesn't happen on the import side, it can still happen on the export side, which is why the exchange rate matters. 2. THE BRIDGE: This tweet reinforces the idea from tweet [1] that exchange rates are a key mechanism for trade adjustment. If the US trade deficit is to close, and import adjustment isn't happening, then export-side adjustment (implying stronger foreign currencies) is necessary. 3. THE VERDICT: Exchange rates of key trading partners (KRW, TWD, CNY, JPY) are crucial for trade rebalancing, suggesting they are currently undervalued and may need to appreciate.

1. THE FACT: The US trade deficit will not close if KRW, TWD, CNY, and JPY remain at current levels. Policy inconsistencies need to be sorted. 2. THE BRIDGE: The current levels of these currencies are contributing to the US trade deficit, implying they are undervalued relative to what would be needed for deficit reduction. This suggests a future appreciation is necessary, or that their current undervaluation is unsustainable in the long run. 3. THE VERDICT: These Asian currencies are likely undervalued and may face pressure to appreciate, making them potential short candidates if one believes their current levels are unsustainable given global trade imbalances.

1. THE FACT: The gap between the CNY and the KRW/TWD/JPY is interesting. 2. THE BRIDGE: An "interesting" gap suggests potential for relative value trades or a re-evaluation of these currencies' valuations against each other. 3. THE VERDICT: Monitor the relative performance and valuation of CNY, KRW, TWD, and JPY for potential future trades.