Currency Forecast - KRW: Maintaining Our Neutral Stance - MAR 2015
BMI View: We remain neutral on the Korean won against the US dollar. While precarious technical support levels pose heavy downside risks to our view, an undervalued real effective exchange rate, large current account surplus, and positive real interest rates should provide support in the event of renewed broad-based US dollar strength. Consequently, we forecast the Korean won to average KRW1,100/USD in 2015.
Short-Term Outlook (three-to-six months)
The Korean won has been steadily weakening against the USD since mid-2014 and is now testing near-term technical support. Real interest rate differentials between South Korea and the US have moved in favour of the won, and we expect them to provide some support for the KRW as disinflationary pressures on headline inflation persist.
|South Korea - KRW/USD|