The USD/KRW pair experienced a sharp spike towards 1444 after South Korean President Yoon’s unexpected declaration of martial law. As of the latest update, the pair has retraced to around 1413.65, according to OCBC’s FX analysts Frances Cheung and Christopher Wong.
Political Instability and Economic Challenges Affect KRW
The rapid rise in USD/KRW was followed by a swift decline after the martial law was rescinded later that same night. Domestic political instability has become the primary concern, as opposition leaders are now calling for President Yoon’s resignation or impeachment. This uncertainty is expected to put temporary pressure on the South Korean Won (KRW), although the impact should diminish once the political situation stabilizes.
However, South Korea’s economy faces broader challenges, including sluggish domestic activity and weakening exports. The KRW, a currency sensitive to market shifts, could continue to be affected by multiple external factors. The threat of U.S. tariffs, concerns over the Federal Reserve slowing its rate cuts, a weaker Chinese Yuan (RMB), and ongoing political unrest may all contribute to continued pressure on the KRW.
Technical Outlook: Mild Bullish Momentum with Potential for Retracement
The daily momentum for USD/KRW remains mildly bullish, although the Relative Strength Index (RSI) has turned lower from overbought conditions, suggesting the pair could experience a temporary retracement. Key support levels are seen at 1410, 1400 (21DMA), and 1385, while resistance is expected at 1425 and 1445.
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