USD/KRW likely to appreciate amid geopolitical tension

South Korean Won turned out to be the worst performer among Asian currencies, as it lost 5.3% against the U.S. dollar year-to-date, followed by Indian rupee and Taiwan dollar at -3.4% and -1.1%, respectively. The capital outflows from the economy were caused by geopolitical tension. South Korea recorded a biggest sell-off among seven Asian nations as global funds withdrew $2.8 billion out of the economy's stocks.

Earlier, Finance Minister Yoo II-ho stated that the economy was prepared to intervene if the KRW volatility turns excessive, with a motive to avoid stresses in the financial markets from spreading to the real economy. In the previous few days, Bank of Korea carried out some interventions; however, past history suggests that the central bank does not intervene much in the FX market.

"As long as the overall market conditions remain manageable, we think there is still upside for USD-KRW for the time being" Commerzbank said in a research note.