South Korea | After a weak Q1, the won should post modest gains

While we expect broad US dollar strength in the rest of 2021, we still see
modest gains in the Korean won (KRW) from current levels. This will come from a real yield advantage over the US, a positive export outlook, and valuations that don’t look stretched.

What you will learn from this report:

• We expect South Korea to retain a positive real yield spread over the US, supported by a higher policy rate than that in the US and a relatively contained inflation outlook.
• The three- and 10-year real yield spreads have remained well
  over 1%, despite the rapid rise in US Treasuries over Q1.
•  We expect South Korea’s exports to continue growing strongly, lifted by the global trade recovery and semiconductor demand.