"Won Appreciation Trend to Serve as Catalyst for Foreign Capital Inflow"

On May 16, iM Securities forecast that the ongoing appreciation trend of the Korean won would serve as a catalyst for the inflow of foreign capital into the stock market.

Park Sanghyun, a researcher at iM Securities, stated, "The USD/KRW exchange rate has fallen back to the 1,390 won level," adding, "While the downward trend in the exchange rate is noteworthy, what stands out even more is the recent sharp increase in volatility."

He continued, "Due to tariff-related news from the Trump administration, not only has the dollar index become more volatile, but so have the currencies of major countries, including the Korean won," and analyzed, "This is because Asian currencies are highly exposed to tariff negotiations with the United States."

He explained, "If tariff negotiations between the United States and major countries are resolved smoothly, the appreciation trend of major currencies will become even more pronounced," and added, "The appreciation of the Chinese yuan and Japanese yen, which have a significant impact on the value of the Korean won, may become particularly prominent during the course of these negotiations."

Park warned, "While tariff negotiations between the United States and major countries are taking place simultaneously, some are raising concerns about the possibility of a sharp weakening of the dollar," but added, "However, a rapid weakening of the dollar is unlikely to occur."

He analyzed, "Above all, a sudden weakening of the dollar could have a negative rather than positive impact on the U.S. economy and financial markets," and continued, "Immediately after the announcement of reciprocal tariffs, the 'Sell USA' phenomenon was essentially a move away from the dollar, which caused a significant shock to the U.S. financial market."

He went on to say, "A sharp weakening of the dollar could lead to turmoil in the U.S. Treasury market, so the Trump administration should also be wary of such a development," and assessed, "At this point, a rapid weakening of the dollar could trigger a resurgence of the 'Sell USA' phenomenon and a seizure in the U.S. Treasury market, potentially causing major confusion for the Trump administration's policy direction."

He concluded, "Ongoing tariff negotiations between the United States and major countries will act as a factor increasing volatility in the foreign exchange market," and added, "Even if the appreciation is not rapid, there is a high probability that Asian currencies, including the Korean won, will continue to appreciate together." He further stated, "If we assume that tariff negotiations proceed smoothly, the appreciation trend of the Korean won will serve as a catalyst for the inflow of foreign capital into the stock market."

This content was produced with the assistance of AI translation services.