MUFG notes robust Korean export growth, especially in semiconductors, but says KRW has underperformed on heavy foreign equity outflows and AI-valuation concerns. With the Bank of Korea seen at the end of its easing cycle and KRW volatility elevated, MUFG expects choppy trading, though its forecasts show a gradual USD/KRW drift lower through 2026.

Equity outflows hit Korean Won

"That said, we still think the BoK’s easing cycle has ended given the improving economic fundamental, financial stability risk related to Seoul’s housing market and heightened KRW volatility."

"This week, KRW was the underperformer in Asia with 2% depreciation against US dollar given significant net foreign equity outflow (USD 5.3bn) caused by concerns over AI valuation and broader risk-off mood."

"As a result, KOSPI index also experienced a pullback of 2.7% to 5100 level ended the week."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)