BofA Forecasts Korean Won to Strengthen in 2026

Key Forecast Highlights

Bank of America (BofA) projects the Korean won will strengthen against the US dollar, targeting a USD/KRW rate of 1,395 by the end of 2026. This forecast is made despite current downward pressure on the currency driven by significant capital outflows from retail investors.

Current Market Overview

The won's ongoing weakness is primarily attributed to large portfolio outflows as Korean investors increase their holdings in foreign equities, particularly US technology stocks. According to BofA, government measures, including a capital gains tax cut on foreign equity sales, have been insufficient to halt the currency's decline.

Economic and Market Impact

BofA analysis suggests that a major correction in the US technology sector could be a significant catalyst for the won's recovery. Such an event would likely trigger repatriation flows back into Korea, strengthening the currency. The bank also suggests that additional tax incentives could help rebalance supply and demand in the foreign exchange market.

Summary Outlook

The long-term outlook for the won hinges on potential shifts in global markets and further policy actions from the Korean government. Investors are monitoring for additional tax incentives and trends within the US tech sector as key indicators for the currency's future performance.

FAQ

Q: What is Bank of America's 2026 year-end forecast for the USD/KRW rate?
A: BofA forecasts the USD/KRW rate will reach 1,395 by the end of 2026.

Q: What is the primary reason for the Korean won's current weakness?
A: The main driver is large portfolio outflows from retail investors purchasing foreign equities, especially US tech stocks.

Source: Investing.com