KRW to gain against USD in Q4: Shinhan Securities

The South Korean won, which has depreciated to an 11-month low against the U.S. dollar on Wednesday, is projected to strengthen against the U.S. dollar in the fourth quarter as the greenback loses value amid a slowdown in the U.S. economy and recovery in Korea’s manufacturing sector, according to Shinhan Securities Co. on Thursday.

“The strong dollar was driven by the favorable U.S. economy,” said Kim Chan-hee, an analyst at Shinhan Securities. “Inflation indices were fairly in line with the expected range, while the economy delivered continuous surprises, supporting the strong dollar along with optimistic fundamentals.”

Yet, despite the surprising results of U.S. private-sector job openings in August, they still maintained a downward trend that began in the beginning of the year. Real consumption, which had expanded in June and July, also slowed 0.1 percent in August from a month ago, according to Kim.

The analyst also pointed out that factoring in credit card transactions in September, domestic demand is expected to slow gradually in the U.S. and the dollar is likely to face increasing downward pressure in the fourth quarter on weak fundamentals.

“Above all, Korea’s September import and export data showed a recovery in information technology-oriented exports,” Kim said. “The improvement in fundamentals of the won, which is linked to the recovery of the manufacturing sector, is likely to facilitate the decline in the won to dollar exchange rate.”

Kim also noted that the overshooting of the won to dollar exchange rate in the mid-to-high 1,300 won level is likely to be resolved in the following one to two months as the dollar weakens.

The U.S. dollar finished at 1,363.5 won on Wednesday, up 14.2 won from the previous session’s closing at 1,349.3 won. The won-dollar rate hit an 11-month low.