Societe Generale strategist Kiyong Seong turns tactically constructive on USD/KRW, arguing that recent Won strength has been driven by late-stage flow factors rather than fundamentals. Seong favors building long USD/KRW positions with a 1,470 target over coming months, highlighting fading ADR and shipbuilder hedge flows and the potential return of Korean retail investors to US equities as key drivers.
Won strength seen as flow driven
“USD/KRW has been unusually volatile and has displayed atypical relationships with traditional market drivers in recent quarters, reflecting the dominant influence of flow dynamics rather than macro fundamentals.”
“For now, the flow-related factors that have been pushing USD/KRW lower (i.e., SK Hynix ADR Flows, Shipbuilders’ FX hedge flows) remain dominant.”
“However, we believe these forces may be entering a late-stage phase, increasing the risk of a reversal.”
“In our view, these unusual dynamics are likely to persist for now.”
“We turn tactically constructive on USD/KRW and favour building long positions, targeting 1,470 over the coming months.”
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