USD/KRW: 2024 was the worst yr for the reason that GFC, will 2025 be higher?

UBS analysts urged that the Korean received (KRW) is perhaps poised for a restoration following its worst yr for the reason that World Monetary Disaster (GFC) in 2024. During the last 12 months, USD/KRW is up 7.5%.

The forex’s vital underperformance was pushed by 5 elements, together with the Kospi’s relative weak point in comparison with the S&P 500, the most important tightening within the South Korea-United States 10-year yield unfold in 20 years, a sluggish manufacturing and exports cycle, steady resident outflows, and late-year home political points.

The received depreciated by 13% in 2024, with three-quarters of this decline occurring within the fourth quarter. Following this downturn, the received started 2025 on a extra secure notice and has been one of many best-performing currencies year-to-date. UBS analysts consider this pattern may proceed fairly than fade.

UBS highlighted a number of constructive developments that might assist the received’s near-term outperformance. The Nationwide Pension Service’s (NPS) reported activation of international trade hedging actions and a slowdown in outbound investments might positively affect Korea’s stability of funds by $50 billion yearly. This potential shift, mixed with a primary stability already at a good 4.5% of GDP, might result in a 5% appreciation of the received.

Furthermore, the Kospi index is displaying indicators of bottoming out amidst low valuations, and home political uncertainties are diminishing. Whereas UBS maintains a cautious stance on the received over the medium time period, analysts see the chance for the forex to proceed unwinding a few of its elevated danger premium within the close to future.

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