The South Korean won remains supported against the US dollar after the Bank of Korea (BoK) raised its policy rate by 25 basis points to 3.0%, marking its second consecutive hike.
Commerzbank expects the BoK to pause at its next meeting but sees a possible further increase to 3.25% if growth and core inflation remain strong.
KRW has already gained around 12% against the US dollar since the end of June, while USD/KRW fell from 1,385 to around 1,378 following the decision.
Strong semiconductor exports, a large current-account surplus, reduced financial outflows and the BoK’s tightening stance are supporting the won. However, after its sharp recent rally, further KRW appreciation could be more gradual.
Commerzbank expects USD/KRW to consolidate between 1,360 and 1,400 in the near term.
Market Impact
The hawkish BoK stance is positive for KRW and potentially bearish for USD/KRW. However, the won’s 12% rally means traders should watch for consolidation rather than another rapid appreciation.
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