State Street Sees Won Weakening to 1,390-1,400 per Dollar by Year-End

State Street Markets has forecasted that the South Korean won will weaken to 1,390-1,400 per US dollar by the end of the year. According to Choi Ji Wook, senior macro strategist for Asia-Pacific at State Street Markets, the currency's potential for further strengthening in the near term is limited due to reduced dollar sales by exporters and sustained demand from Korean investors for foreign stocks.

The won has already strengthened significantly since its weakest level of 1,560 per dollar in early June. However, Choi believes that the room for further strengthening has been largely exhausted. He pointed out that dollar-to-won conversions linked to SK hynix's American depositary receipts have declined, and exporters reduced currency sales in September because they had already converted a substantial portion of their dollar holdings.

Additionally, Choi cited flows of Korean investors' funds into foreign equities as a factor putting pressure on the won. According to the Korea Securities Depository, net purchases of US stocks by Korean investors totaled $4.64 billion in July and $1.96 billion in August. As of Thursday, this figure had reached $700.33 million in September.

Despite this forecast, State Street maintains a positive assessment of the currency over the medium and long term. Choi cited South Korea's historically large current account surplus, possible dollar sales related to corporate taxes in the first quarter of next year, and the need for Samsung Electronics and SK hynix to convert dollar assets into won for shareholder payments as supporting factors.