According to TD Securities’ Macro Research team, the South Korean Won (KRW) has been the best-performing major currency in July, drawing significant attention in the FX market. This outperformance is particularly notable given the backdrop of rising crude oil prices due to renewed Middle East geopolitical risks and declining equity prices for semiconductor stocks [1].
Despite the recent rally in KRW, TD Securities maintains that the broader uptrend in USD/KRW remains intact and is likely to persist until a new bearish USD cycle emerges. The analysts highlight the 1493-1494 level in USD/KRW as a critical threshold; if the spot price holds above this range in the coming week, it would signal an opportunity for dip buyers expecting the USD uptrend to continue. Conversely, a break below this level could force trend followers to flip short [1].
The report emphasizes that sustained downside in USD/KRW has only occurred during periods of broad USD weakness in recent years. TD Securities currently holds a long USD position via USD/CNH forwards and expects the USD to remain resilient until US Federal Reserve rate hikes are priced out on the back of weaker US economic data [1].
A key risk to this outlook is potential FX intervention by South Korean policymakers, which could extend the KRW’s bearish momentum and push USD/KRW materially lower [1].
CONCLUSION
TD Securities sees the recent KRW rally as insufficient to reverse the prevailing USD/KRW uptrend in the near term, barring a broader shift in USD sentiment or local FX intervention. The 1493-1494 level is identified as a key technical threshold for market participants. Overall, the outlook remains cautiously supportive of USD strength against KRW.