Asia’s Best Performer Currency Expected to Revamp

This quarter, South Korea’s currency is Asia’s best performer. Nevertheless, a better chance to purchase it will appear early next year for those who missed it.

Choi Kyungjin is the head of fixed income and currencies at Deutsche Bank AG in Seoul. He claims that if thin markets at the year-end contribute volatility, the won could fall to as low as 1,380 per dollar in the first quarter. Choi believes it will rise to as much as 1,100 per dollar next year. But even if the won declines to 1,350, according to Choi, it would be a “very good level” to purchase the currency.

In a quarter, won switched from the worst to the best performer in Asia. Emerging-market currencies, such as the won, have benefited from bets that the US Federal Reserve will slow its pace of rate increases. The FTSE World Government Bond Index is expected to occur as early as March 2023. If Korea is included, it will attract up to 90T won ($68.6B) of international resources into the country. Accordingly, the won may get a further boost.

Amidst Won Signals, Uncertainty May Still Lurk

Uncertainties abound for the stock market. Choi said this included the possibility of lower semiconductor prices and a slowdown in China, South Korea’s main export market. Despite its 9% quarterly growth, the won was still more than 9% weaker than the dollar in 2022.

Next year, Deutsche Bank expects to earn around $1,300 per dollar. Hawkish moves by the Fed and European Central Bank dampened risk appetite in the area.

Inflation eases, and a downturn will likely hit the US and Korea in 2023. This gives Choi a brighter picture of Korean sovereign bonds. Despite government efforts to relieve some of the pressure, he believes that Korea’s economy will continue to suffer from credit and housing market troubles.