Recent KRW gains against USD to reverse in coming months, likely to depreciate 6% in 2016

In the past month the South Korean won has appreciated against the USD and has gained some of its recent losses with the help of current portfolio inflows. However, in the following months, this trend is likely to reverse as the won continues to be vulnerable to US Fed’s monetary tightening amidst an easing bias back in home, according to Scotiabank.

“USDKRW will likely close 2016 at 1250, implying a 6% depreciation over the course of the year”, noted Scotiabank.

Meanwhile, sovereign credit rating outlook for South Korea is stable after a marked improvement in perceived creditworthiness in 2015, added Scotiabank. Standard & Poor’s upgraded South Korea’s credit rating to “AA-” in September 2015 due to the firm outlook for the economic growth and also because of the drop in banking sector’s external debt.

Meanwhile, in December 2015, Moody’s also upgraded its rating to “Aa2”, whereas Fitch’s current rating for the country is “AA-”. The International Monetary Fund has projected that South Korea’s general government gross debt will average 40% of GDP by 2017.