South Korean Won: Bearish Won view with 1,400 support – TD Securities

TD Securities turns bearish on the Korean Won, arguing USD/KRW is likely to find support around 1,400 as prior KRW strength fades. They have entered short KRW positions versus both the Dollar and Japanese Yen via NDFs, citing stretched valuation, waning momentum and negative correlation to AI equities, while flagging unhedged foreign inflows as the key upside risk to KRW.

KRW seen rich, momentum fading

"We turn bearish KRW as USD/KRW likely finds support at 1400."

"Bullish KRW momentum is waning, valuation and negative FX correlation to AI should allow KRW to retrace some of its recent gains."

"With bullish KRW momentum finally starting to wane and AI equity sentiment stabilizing after Q2 US earnings, we entered a short KRW trade vs the USD and JPY via NDF in our model portfolio."

"KRW is broadly rich vs global currencies including the USD and JPY after the recent rally but maintains negative correlation with the KOSPI."

"The risk to the trade is foreign inflows to Korea equities without FX hedging and Korean corporate repatriation cause KRW to outperform both the USD and JPY over the next three months."