Bank of America: Under Middle East risks, USD/KRW exchange rate expected to fluctuate within a range in the short term

Investing.com - Bank of America expects that the USD/KRW exchange rate will maintain a range-bound fluctuation in the short term before declining. The bank points out that South Korea’s sensitivity to energy prices and the risk sentiment related to the Middle East crisis are the main influencing factors.

The bank stated that the USD/KRW exchange rate may stay within the recent trading range until the Middle East crisis is resolved. South Korea’s high sensitivity to fluctuations in energy prices and changes in risk sentiment is expected to keep this currency pair constrained.

Bank of America noted that any rapid upward movement in the USD/KRW exchange rate could be seen as excessively diverging from the fundamentals. Such movements may trigger policy actions aimed at maintaining financial stability.

Looking at the longer term, the bank stated that the USD/KRW exchange rate is expected to decline. Strong chip exports are anticipated to provide support for the Korean won.

Bank of America mentioned that a more balanced flow of capital is also expected to drive the USD/KRW exchange rate lower.

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