Asia FX Talking: North Asian currencies continue to perform well
The desk suggests that North Asian currencies, particularly the Korean won, are experiencing a significant rally, though a sustained move below the 1350 level in USD/KRW may be challenging. Per the full note from ing-think, the won has appreciated approximately 13% from its recent highs, indicating strong bullish momentum backed by local demand and positioning shifts. The report also highlights the stability in the Chinese renminbi due to exporter conversions, even against a backdrop of widening yield spreads. Without immediate high-impact events on the calendar, traders should prepare for potential volatility as positioning aligns ahead of market movements.
What the desk is arguing
The desk argues that North Asian currencies, especially the Korean won, are in a bullish phase, primarily driven by solid local demand and positioning. Per the full note, the USD/KRW pair has demonstrated remarkable strength, having fallen significantly from summer highs, though reaching and maintaining a position below 1350 may be difficult this month.
Supporting this outlook, the report notes a rally in USD/CNY, currently trading around 6.71, reflecting ongoing exporter conversions that have countered any bearish sentiment from widening US-China yield spreads. The expectation for the CNY remains a cautious appreciation, aligning with the observation of substantial trade surpluses contributing to its strength.
Where it sits in our coverage
Based on our assessments, we currently have a target for USD/KRW at 1350. Specific targets from various firms show the following: - ING: 1350.00 for Dec-26 - JPM: 1375.00 for Dec-26 - DB: 1300.00 for Dec-26.
This perspective aligns with our target being at the higher end of the spread, as ING is leaning toward a cautious approach, while JPM appears more bullish. Our expectations suggest the market is pricing in potential challenges for the Korean won to sustain its upward momentum, particularly as it approaches significant psychological levels.
How other firms see it
Aligned firms, including ING and JPM, are generally optimistic about the Korean won's resilience but foresee potential resistance at pivotal levels. In contrast, firms like BofA maintain a more bearish stance, predicting headwinds from changing yield dynamics that could pressure the Korean currency.
Traders should also keep an eye on other related pairs such as USD/CNY and USD/IDR, as shifts in these currencies can influence sentiment and positioning for the North Asian region, particularly amid evolving geopolitical and economic conditions in the region.
Key takeaways
- 01The Korean won has appreciated approximately 13%, leading the North Asian currency rally.
- 02A sustained move below 1350 in USD/KRW may prove challenging this month.
- 03The Chinese renminbi remains stable due to strong exporter conversions despite widening yield spreads.
- 04No immediate high-impact events are expected to disrupt the momentum of these currencies.
Market implications
Traders should watch the 1350 level in USD/KRW closely, as failure to maintain this could signal a reversal. Positioning aligned with a potential exposure to rising CNY, especially ahead of any US-China yield discussions, could also lead to significant market movements.
Risks to this view
A key risk to this bullish view on the won and the CNY is a potential shift in Fed monetary policy that could widen yield spreads substantially, prompting renewed bearish sentiment and positioning from market participants.
Articles Asia FX Talking: North Asian currencies continue to perform well Published 10:59 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download It has been another strong month for the North Asian currencies, with the Korean won leading the pack. However, a 13% drop in a couple of months is exceptional for USD/KRW and a move below 1350 may be difficult to sustain this month. Elsewhere, the renminbi continues its steady appreciation, while the Indonesian rupiah and Philippine peso look more fragile Deepali Bhargava and Lynn Song The Korean won has rallied sharply, pushing USD/KRW lower, though a sustained break below 1350 may prove difficult this month USD/CNY: CNY appreciation trajectory remains intact Spot One month bias 1M 3M 6M 12M USD/CNY 6.7106 Neutral 6.70 6.70 6.67 6.60 USDCNY continued to grind lower over the past month, reaching 6.71 at the time of writing, which is the lowest level since early 2023.
The CNY has shrugged off widening US-China yield spreads, as market participants weigh the risks of CNY appreciation with the interest rate spreads. The main impetus for CNY strength continues to be exporter conversions, as China’s trade surplus remains massive. Rallies in the USDCNY have typically been sold into by exporters this year.
We hold our 6.67-6.92 fluctuation band for 2H26, and risks remain tilted to the downside. A contrarian view: yield spreads might further widen if the Fed hikes and the PBoC cuts rates (the current ING forecast), and at some point it may draw CNY bears back into action. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/KRW: Sustaining a break of 1350 will be tough Spot One month bias 1M 3M 6M 12M USD/KRW 1344.80 Bullish 1375.00 1375.00 1350.00 1300.00 USD/KRW’s jaw-dropping decline continues, with the fall from the summer’s high now around 13%.
This pair does occasionally have corrections of this magnitude – e.g. in 2022 – and we suspect a move below 1350 will be hard to sustain in the near term. This is especially so since we think the dollar can find some support from a Fed hike in September. But the medium-term trend looks to have shifted.
Korean exporters now seem to have a lot more confidence in the won and the 3.00% policy rate looks attractive. This could be taken to 3.50% over the next six months, according to the Bank of Korea. Strengthening domestic demand on the chip boom clearly helps.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/INR: INR likely to stabilise at current levels Spot One month bias 1M 3M 6M 12M USD/INR 94.46 Neutral 94.60 94.50 94.00 94.00 GDP growth surprised on the upside in 2Q, rising by 7.8% YoY on the back of strong consumer demand, resilient exports, and robust public capital expenditure. While growth is likely to moderate in 2H, we still expect a healthy 7.1% expansion for the full year, reinforcing underlying support for the INR. Recent measures to attract FCNR deposits have exceeded expectations, generating inflows of more than USD125bn.
These inflows should help swing the anticipated balance-of-payments deficit into a surplus of over USD50bn, while further strengthening the RBI's FX reserve position. Foreign investment in Indian equities rebounded in July and August, providing an additional tailwind for the currency. We expect USD/INR to stabilise around current levels, supported by rising FX reserves and the RBI's ability to manage market pressures, including a sizeable, short FX position.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/IDR: Under-performance in IDR to remerge Spot One month bias 1M 3M 6M 12M USD/IDR 17635.00 Mildly Bullish 17800.00 18000.00 18000.00 17800.00 IDR was Southeast Asia’s best-performing currency last month, supported by renewed foreign inflows into equity and bond markets and broad US dollar weakness. However, concerns over government policy, including greater intervention in the private sector, and the risk of a sovereign rating downgrade continue to weigh on sentiment. The broader external account picture has yet to improve.
Weak FDI inflows and a widening current account deficit are likely to keep depreciation pressure on the rupiah. We therefore continue to expect Bank Indonesia to deliver one additional 25bp rate hike this year. Falling FX reserves and weakening reserve adequacy have reduced BI's scope for aggressive FX intervention.
While we are lowering our USD/IDR forecast to reflect recent IDR strength, we continue to expect depreciation pressures to re-emerge. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/PHP: Weakening bias to persist for PHP Spot One month bias 1M 3M 6M 12M USD/PHP 62.61 Neutral 62.50 62.50 62.00 61.00 The BSP raised rates by 25bp to 5.0% last month and delivered a hawkish message, lifting its 2027 inflation forecast amid concerns over El Niño-related food price pressures and stronger-than-expected wage growth. With inflation risks remaining elevated and core inflation yet to show convincing moderation, we continue to expect another 25bp rate hike in 4Q26, despite GDP growth continuing to surprise significantly on the downside in 2Q.
Real policy rates are now close to historic lows, reducing the degree of monetary restraint. At the same time, interest rate differentials between the Philippines and the US have narrowed materially, limiting support for the peso. Peso stability could face additional pressure if the Fed delivers another 25bp rate hike as we expect.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/SGD: SGD should continue to outperform Spot One month bias 1M 3M 6M 12M USD/SGD 1.2663 Mildly Bullish 1.28 1.27 1.27 1.26 Singapore continues to benefit from robust AI-related investment and data centre activity, which is sustaining domestic demand and contributing to upward pressure on services inflation. While July's inflation data undershot consensus expectations, the continued acceleration in both headline and core inflation, coupled with persistent upside risks from energy, food and domestic demand, suggests the MAS may not be done tightening. In July, the MAS surprised markets by increasing the slope of the SGD NEER policy band "very slightly", signalling greater concern about inflation risks than investors had anticipated.
As such, we believe the October policy meeting remains live and cannot rule out further modest policy tightening. We expect SGD to continue to outperform within the region. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/TWD: TWD appreciates as headwinds fade Spot One month bias 1M 3M 6M 12M USD/TWD 31.55 Neutral 31.60 31.50 31.30 31.10 The TWD strengthened over the past month, with the USDTWD dropping from around 32.5 to 31.6, despite a relatively steady USD backdrop.
With Taiwan’s peak dividend season passing, this removed a source of outflow pressure. Equity market inflows and exporter USD selling were the main sources of support for the TWD over the past month. Furthermore, the CBC looks increasingly likely to hike rates by year-end, perhaps as early as this month given the upside surprises in inflation.
Looking ahead, we still hold an appreciation bias for the TWD in the medium term, but we’re looking for broadly sideways momentum in the short-term. We have pushed back the timeline for our TWD appreciation and now look for the USDTWD to end the year around 31.5. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts FX Talking Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Deepali Bhargava Regional Head of Research, Asia-Pacific Deepali Bhargava joined ING in 2024 and is Head of Research and Chief Economist Asia-Pacific. She has over 19 years of work experience as a macro specialist covering rates, FX and equity markets… Lynn Song Chief Economist, Greater China Lynn Song joined ING in January 2024 as the Chief Economist for Greater China.
Prior to joining ING, he worked at China Construction Bank International, China Merchants Securities (HK), and Haitong…
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