ING Predicts 14% Decline of Korean Won Against US Dollar by 2024

2024 Currency Forecast: South Korean Won Weakening

In a recent analysis, ING Group has projected a significant depreciation of the South Korean won against the US dollar in 2024. The won is anticipated to weaken by approximately 14% to reach an exchange rate of 1,472.50 by the end of the year. There are even predictions that the currency could dip as low as 1,500 by 2025.

Key Factors Driving the Depreciation

Economist Min Joo Kang highlights several critical factors contributing to this bearish outlook:

• Federal Reserve's Monetary Policy: The Federal Reserve's slower pace of interest rate cuts is exerting upward pressure on the US dollar, making it a more attractive currency for investors.
• Escalating Trade Tensions: Ongoing trade disputes and tensions affecting international markets are impacting the South Korean economy, leading to increased uncertainty.
• Political Instability: Internal political issues within South Korea may hinder economic growth and investor confidence.
• Widening Yield Gap: The growing difference in bond yields between the US and South Korea intensifies investor preference for US assets, driving the won lower.

Quarterly Exchange Rate Projections for 2024

ING Group forecasts the following exchange rates for the South Korean won against the US dollar across different quarters of 2024:

1. Q1 2024: 1,475
2. Q2 2024: 1,500
3. Q3 2024: 1,450
4. Q4 2024: 1,425

Implications for the South Korean Economy

The anticipated weakening of the won suggests a challenging year ahead for South Korea's economy. A weaker currency can have mixed effects:

• Positive Effects: It may boost exports by making South Korean goods cheaper for foreign buyers.
• Negative Effects: Conversely, it can increase the cost of imports, leading to inflationary pressures.

As these economic factors unfold, it remains critical for businesses and investors to stay informed and prepared for fluctuations in the currency market.

Conclusion

The outlook for the South Korean won reflects broader economic trends affected by global monetary policies, trade dynamics, and political stability. Stakeholders should consider these factors in their strategic planning for 2024 and beyond.