Research Briefing | Apr 23, 2021

South Korea | After a weak Q1, the won should post modest gains

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While we expect broad US dollar strength in the rest of 2021, we still see
modest gains in the Korean won (KRW) from current levels. This will come from a real yield advantage over the US, a positive export outlook, and valuations that don’t look stretched.

What you will learn from this report:

  • We expect South Korea to retain a positive real yield spread over the US, supported by a higher policy rate than that in the US and a relatively contained inflation outlook.
  • The three- and 10-year real yield spreads have remained well
    over 1%, despite the rapid rise in US Treasuries over Q1.
  •  We expect South Korea’s exports to continue growing strongly, lifted by the global trade recovery and semiconductor demand. 
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