Hana Securities stated that despite volatility stemming from trade negotiations with the United States in July, the downward trend for the USD/KRW exchange rate remains valid, presenting an average forecast of around 1,360 KRW for the third quarter and around 1,340 KRW for the fourth quarter.
On July 4, Jeon Gyuyoun, a researcher at Hana Securities, said in the report "Short-term Exchange Rate Outlook for July and Future Direction," "Considering the global US dollar weakness, the perception that the Korean economy has reached its bottom, and improvements in the foreign exchange market's supply-demand conditions, we believe the downward trend for the USD/KRW exchange rate in the second half of the year remains intact."
First, Jeon pointed out, "The US economy has started to deteriorate before inflation rises due to tariffs as initially expected, which is strengthening the case for the Federal Reserve to cut interest rates." He added, "Expectations for rate cuts and a slowdown in the US economy are factors supporting US dollar weakness in the second half of the year."
He also noted, "The perception that the domestic economy has bottomed out needs to be reflected in the foreign exchange market," and added, "The inflow of foreign capital due to the domestic stock market's outperformance is also changing supply-demand conditions."
He explained, "Previously, the USD/KRW exchange rate found strong support around the 1,350 KRW level, mainly due to overseas investments by domestic investors, especially individuals investing in foreign stocks. However, since June, as net buying of domestic stocks by foreign investors has strengthened, the supply-demand tug-of-war between domestic overseas investment and foreign investment in Korea has become more balanced." He analyzed, "This is a factor that could lower the support level for the exchange rate in the second half of the year."
Hana Securities' average forecast for the USD/KRW exchange rate announced on this day is around 1,360 KRW for the third quarter and around 1,340 KRW for the fourth quarter. The previous day's closing price in the Seoul foreign exchange market was at the 1,359 KRW level.
Jeon said, "In the short term, volatility will be inevitable as the Donald Trump administration in the United States is accelerating trade negotiations with various countries ahead of the expiration of tariff suspensions." However, he added, "This will be temporary, and if the trade disputes have passed their worst phase, the foreign exchange market is highly likely to eventually reflect fundamentals."
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