Strategists cite late-stage hedge and ADR flows as catalysts for a potential reversal in the Korean Won’s recent strength.
Societe Generale strategists have turned tactically constructive on USD/KRW, targeting 1,470 over the coming months. The shift follows analysis indicating recent Won strength stems from temporary flow factors rather than fundamentals, with risks of a reversal emerging.
Recent volatility in USD/KRW has deviated from traditional macro drivers, driven instead by flows like SK Hynix ADR repatriation and shipbuilders’ FX hedging. These forces, while dominant, are seen entering a late-stage phase, increasing the likelihood of a pullback.
The strategists highlight the potential return of Korean retail investors to US equities as a key factor that could support USD/KRW upside. Positioning is recommended as flow dynamics remain the primary influence for now.