State Street forecasts weakening of South Korean won — Korea Herald
In South Korea, State Street Markets expects the won to weaken to 1,390–1,400 per US dollar by the end of the year. The company believes the currency’s potential for further strengthening in the near term is limited due to reduced dollar sales by exporters and sustained demand from Korean investors for foreign stocks, Korea Herald reports.
Won forecast
Choi Ji Wook, senior macro strategist for Asia-Pacific at State Street Markets, said at a media roundtable at the company’s Seoul office that the room for the won to strengthen has already been largely exhausted. In early June, the currency traded at around 1,560 won per dollar — its weakest level since the 2009 global financial crisis. In early September, the won strengthened to the low 1,330s per dollar.
Despite this strengthening, State Street moved to an underweight position on the won about two weeks ago and forecasts its weakening. According to Choi, dollar-to-won conversions linked to SK hynix’s American depositary receipts have declined. The market has already absorbed a significant share of dollar sales related to corporate tax payments, while exporters reduced currency sales in September because they had already converted a substantial portion of their dollar holdings.
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Stock market and capital
Choi also cited flows of Korean investors’ funds into foreign equities following a correction in the Kospi index as a factor putting pressure on the won. According to the Korea Securities Depository, their net purchases of US stocks totaled $4.64 billion in July and $1.96 billion in August. As of Thursday, this figure had reached $700.33 million in September. Foreign investors, meanwhile, continued to sell Korean stocks at a moderate but steady pace.
At 3:30 p.m. on Thursday, the won was quoted at 1,382.2 per US dollar, down 13.6 won from the previous session. At the same time, State Street maintains a positive assessment of the currency over the medium and long term. Choi cited South Korea’s historically large current account surplus, possible dollar sales related to corporate taxes in the first quarter of next year, and the need for Samsung Electronics and SK hynix to convert dollar assets into won for shareholder payments as supporting factors.
According to Choi, the won’s strengthening has outpaced that of the Japanese yen, which is often considered the won’s currency counterpart. He suggested that this may indicate an increasingly greater divergence in the long-term paths of the two currencies.
