Korea Investment & Securities announced on the 27th that it is raising its third-quarter outlook for the USD-KRW exchange rate from 1,360 won to 1,380 won per dollar.
Moon Daun, a researcher at Korea Investment & Securities, stated in the 'Exchange Rate Outlook Update' report on the 27th, "Upward pressure on the exchange rate is increasing due to both domestic and international policy uncertainties." The quarterly USD-KRW exchange rate forecasts are 1,380 won for the third quarter and 1,370 won for the fourth quarter. The third-quarter forecast was raised by 20 won compared to the previous projection, while the fourth-quarter forecast remains unchanged. The range for the second half of the year is between 1,320 and 1,430 won.
Researcher Moon explained the background for raising the third-quarter forecast, saying, "This is because domestic and international policy uncertainties are persisting at higher-than-expected levels." He added, "In August, negotiations over tariffs between U.S. President Donald Trump and major countries heightened caution. Uncertainty over inflation, reflecting the effects of U.S.-imposed tariffs, is also fueling concerns regarding the Federal Reserve's monetary policy path." He further noted, "Uncertainties surrounding domestic policies, such as tax code revisions, are also having a greater-than-expected impact on foreign capital flows and the exchange rate."
The previous day, the USD-KRW exchange rate closed at 1,395.8 won in the Seoul foreign exchange market, once again threatening to break above the 1,400-won level. As of the 25th, the cumulative average for the third quarter stands at 1,382 won per dollar.
On the morning of the 26th, the status board in the dealing room of Hana Bank headquarters in Jung-gu, Seoul, displayed the KOSPI, USD-KRW exchange rate, and KOSDAQ index. Photo by Yonhap News
However, the domestic and international policy uncertainties that have driven up the USD-KRW exchange rate in the third quarter are expected to gradually ease. Researcher Moon pointed out that the resumption of rate cuts by the U.S. Federal Reserve and the recovery of the domestic economy will create an environment that supports a cyclical decline in the USD-KRW exchange rate through the first half of next year.
He predicted, "During the first half of next year, the quarterly average will fluctuate mainly between 1,350 and 1,360 won, lowering the overall level." However, he also noted, "At that time, the interest rate gap with the U.S. and strong demand for the U.S. dollar will continue to provide firm support for the lower end of the exchange rate in the low 1,300-won range." He went on to forecast, "After the Federal Reserve's rate-cutting cycle ends in the second half of next year, the forces driving a structural rise in the exchange rate will become more pronounced, resulting in a rebound trajectory."
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