Analysts at MUFG Bank, see the Korean won performing well against the US dollar over the coming months. The forecast USD/KRW at 1200.0 by the end of the third quarter and at 1185 by the end of the first quarter 2021. The expect range for the current quarter is 1175-1235.
Key Quotes:
“The Korean won saw a second consecutive month of gains against the US dollar in July albeit at half the increment chalked up in June. Short-term reversals in oversold dollar positions may see the Korean won pare some gains in August. The South Korean economy walked into technical recession in Q2 after declining by 3.3% on a quarter-on-quarter (q/q) basis following Q1’s -1.3% q/q.”
“While the latest July export data reflected a likely bottoming out in April, its recovery is still tentative and gradual, especially amidst COVID-19 uncertainties going beyond the first wave both domestically, and in major markets for the country especially the US.”
“The third supplementary budget will remain significant in boosting growth in the second half of the year. This is especially given financial imbalance risks of easy money with elevated property prices, and the BOK’s hints of its preference for non-rate tools while also downplaying the prospect of large-scale bond purchases.”
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