Global investment banks see Korean won staying weak in 2025

The South Korean won is forecast to hover in the mid-1,400s level against the dollar through the third quarter of 2025, according to global investment banks.

They said the political uncertainties in the aftermath of President Yoon Suk Yeol’s impeachment will likely drag down Asia’s No. 4 economy for some time, according to the Korea Institute for International Economic Policy (KIEP) on Tuesday.

Before Yoon’s ill-fated martial law decree in early December, a majority of global banks expected the won to rebound to the 1,200 level against the greenback in the second quarter of 2025.

Global IBs have since revised their dollar/won forecast by a large margin to factor in the political turmoil, which drove down the won to a 15-year low last week.

A Bloomberg analysis of their dollar/won projections showed that their median forecast for the Korean currency was 1,435 against the greenback in the first quarter of 2025, the KIEP said in a document submitted to a lawmaker of the main opposition Democratic Party.

That marks a sharp revision to their previous median forecast of 1,305 in November 2024.

Nomura Securities forecast the won at 1,460 per dollar in the first quarter of 2025, compared with its earlier projection of 1,300.

Standard Chartered expects the Korean currency to recover to 1,405 to the dollar in the first quarter of 2025. But it expects the won to fall back to 1,440 in the second quarter.

In late 2024, Standard Chartered had predicted the won strengthening to 1,300 in the first quarter of 2025.

On Dec. 27, the won plummeted to 1,467.5 to the dollar — a level not seen since the 2009 global financial crisis.

To prop up the won, the Bank of Korea and the Ministry of Economy and Finance have intervened in the market with dollar selling, which foreign exchange dealers said remained at a modest level. 

The KIEP warned against any massive dollar-selling intervention over an extended period, saying it would chip away at the country's foreign exchange reserves and lead to a fall in the country's credit rating.

Write to Jin-gyu Kang at joseph@hankyung.com
 

Yeonhee Kim edited this article.