The South Korean won is forecast to stay in the mid-1,400 won level to the dollar through the third quarter of 2025, according to global investment banks.
They said the political uncertainty in the aftermath of President Yoon Suk Yeol’s impeachment will likely drag down Asia’s No. 4 economy for an extended period, according to the Korea Institute for International Economic Policy (KIEP) on Tuesday.
Before Yoon’s ill-fated martial law decree in early December, a majority of global banks expected the won to rebound to the 1,200 level against the dollar in the second quarter of 2025.
Global IBs have revised their forecast for the dollar/won pair by a big margin to factor into the political turmoil, which drove down the won to a 15-year low last week.
A Bloomberg analysis of their dollar/won projections showed that their median forecast for the Korean currency was 1,435 against the greenback for the first quarter of 2025, said the KIEP in a document submitted to a lawmaker of the main opposition Democratic Party.
That was a sharp revision to their previous median forecast of 1,305 as of November, 2024.
Nomura Securities forecast the won at 1,460 per dollar in the first quarter of 2025, compared with its earlier projection of 1,300.
Standard Chartered foresees the Korean currency to recover to 1,405 to the dollar in the January-March quarter in 2025. In the second quarter, it expects the won to fall back to 1,440.
In late 2024, it foresaw the won to strengthen to 1,300 in the first quarter of 2025.
On Dec. 27, the won plummeted to 1,467.5 to the dollar not seen since the 2009 global financial crisis.
To prop up the won, the Bank of Korea and the Ministry of Economy and Finance has intervened in the market with dollar selling, which foreign exchange dealers said remained modest.
The KIEP warned against any massive volume of dollar-selling intervention for a long period, which would chip away at the country’s foreign exchange reserves and lead to a fall in its credit rating.
By Jin-gyu Kang
joseph@hankyung.com
Yeonhee Kim edited this article.
