USD/KRW: S. Korean’s economy will continue to support the won, but volatility remains – MUFG

Analysts at MUFG Bank, point out that capital outflows from South Korea’s equities market eased in May, helping the won that appreciated versus the dollar. They forecast USD/KRW at 1230.00 by the end of the second quarter, and at 1210.00 by the end of 2022. 

Key Quotes:

“KRW’s rebound in May was attributed to capital inflows, with foreign investors buying about a net USD 135mn of Korea equities in the month after a net selling of more than USD 4.9bn in April.”

“As the country’s economy continued to show resilience, improved sentiment helped to support the currency.”

“Amid growing concerns that inflationary pressures could hamper economic growth, the finance ministry on 30th May rolled out a set of measures to tame inflation and stabilize living conditions, including the removal of import duties on key foodstuffs. We expect those measures to help to boost confidence in Korean economy, which in turn will attract renewed capital inflows and support the currency. Having said that, external factors including China’s Covid situation and geopolictical tensions will keep the KRW volatile. Looking ahead, the US dollar’s movement will continue to play a key role in KRW’s movements in the near-term.”