Korea Investment & Securities forecasted on the 8th that the recent decline of the won-dollar exchange rate into the 1,330 won range could be followed by a sustained trend of a stronger Korean won.

In a report released today, Researcher Moon Da-un stated, "Compared to the past when the won-dollar exchange rate was in the 1,330 won range, there are now more factors pulling the exchange rate down."

Korea Investment & Securities projected the average won-dollar exchange rate for the fourth quarter at 1,350 won, presenting an appropriate range of 1,280 to 1,420 won. The firm also forecast next year's annual average exchange rate to hover around the 1,350 won level.

Researcher Moon pointed to the influx of export-earned dollars into the domestic foreign exchange market as the primary background for the recent drop in the exchange rate.

According to Korea Investment & Securities, September's trade balance and current account surplus expanded significantly to $49.8 billion and $41.0 billion, respectively.

Exporters' Dollar Selling Accelerates

In the past, even when South Korea posted a current account surplus, companies often refrained from immediately converting dollars into the local currency, preventing the exchange rate from falling easily. This was driven by strong expectations that the dollar would appreciate further, causing companies and investors to delay dollar selling while rushing to buy.

However, the atmosphere has changed recently, according to the analysis.

"While large trade and current account surpluses continue, major exporting companies are shifting toward selling dollars, injecting foreign currency into the domestic exchange market," Moon explained. "This is serving as a downward factor for the exchange rate."

Improving expectations for the South Korean economy are also expected to lend momentum to the stronger won.

Based on Bloomberg consensus forecasts, South Korea's economic growth rate projection for next year has recently risen to around 2.5%, outpacing the U.S. growth rate projection of 2.1% to 2.2%.

"Next year, South Korea's growth forecasts will likely continue to be revised upward, showing a growth advantage over the U.S.," Moon analyzed. "This difference in growth rate projections could also work favorably for the Korean won."

Pace to Moderate Despite Downward Trend

Nevertheless, the exchange rate is not expected to continue falling at the same pace. Given the sharp decline recently, a moderation in speed may occur.

"While the speed may adjust—such as through additional drops or a brief pause before resuming a downward path—the broader trend strongly points toward a high possibility of downward adjustments in the exchange rate," Moon noted.

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