UBS ON AIR
Loading…
FX BANK FORECAST · COVERAGE
Institutional FX coverage in your inbox
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
The desk interprets South Korea's declining export figures as a reflection of broader uncertainties impacting the economy, notably in semiconductor sales and export dynamics. Per the full note from UBS, while overall exports fell due to calendar-adjusted working days, semiconductor exports remain a bright spot, suggesting resilience amid weakened exports to primary markets like the U.S. and China. The commentary indicates potential long-term effects of increasing costs associated with skilled migrant labor in the U.S., which could stifle productivity. As no high-impact events for South Korea are on the horizon, focus remains on ongoing central bank comments for broader economic signals.
The desk views the recent drop in South Korean exports, especially to key partners like the U.S. and China, as indicative of underlying economic vulnerabilities. Per the full note from UBS, while semiconductor sales provided some support, overall exports fell on a year-over-year basis, a worrisome trend that could have ripple effects in global markets.
Notably, the adjusted export figures underscore existing complexities such as holiday timing and export front-loading. The apparent strength in semiconductors, buoyed by delays in domestic production capacity, offers a glimmer of hope, but also highlights external dependencies that could jeopardize long-term growth.
Our current consensus target for USD/KRW is set at 1.075, with a range between 1.04 and 1.12. Notable targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This analysis aligns with the wider consensus which suggests a cautious outlook on the South Korean economy amid global uncertainties. The desk's target sits within the projected range, reflecting a balance of optimism tempered by real risks.
Most firms adopt a cautious stance, with jpmorgan and bofa predicting slightly differing trajectories for the USD/KRW pair. In contrast, firms like citi are taking a more bearish view, anticipating even lower outcomes for the Korean won against the dollar.
Related currency pairs to monitor include AUD/KRW and USD/CNH, as fluctuations in these markets might indirectly influence South Korean export assessments and overall economic outlook.
No significant economic events are scheduled in the near term that would directly affect South Korean exports or monetary policy, leaving the market to focus on broader central bank commentary that may shape perceptions moving forward.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Watch the USD/KRW closely, particularly around the 1.075 level, as any significant downturn could signal deeper economic issues in South Korea. Additionally, monitor upcoming central bank speeches for insights into potential shifts in monetary policy.
Risks to this view
Should U.S. immigration policies shift more drastically—potentially raising costs or limiting skilled labor—this could lead to an unexpected increase in U.S. productivity, countering current trends and reversing export dynamics for South Korea.
Good morning. This is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's 7 o'clock in the morning London time on Monday the 22nd of September.
Trade data from South Korea showed some weakness in exports for the early part of September. These numbers are complicated by holiday timings and front-loading of exports ahead of US policy changes in August, but adjusting for working days showed a decline in exports year over year. Exports to the United States and to China as a frequent proxy for the United States were predictably weaker, although chip export numbers remained strong.
With immigration-related delays to building chip production capacity in the United States, chips may continue to boost export growth for a longer period of time. Immigration continues to generate headlines in the States with some confusion over the weekend about the potential $100,000 fee for H-1B visa applications to the United States. Commerce Secretary Lutnick and the White House press spokesperson have given somewhat contradictory guidance.
Lutnick, of course, does not control immigration although the fallout of this policy may be relevant for the Department of Commerce. In the near term, the uncertainty may cause individual anxiety and additional stress for companies with migrant workers, but it does not appear likely to change much for the economy. Existing workers, it seems, will still be allowed to work.
In the long term, raising the cost of skilled labour in the United States when near full employment does not necessarily offer domestic alternatives might hinder inward investment. As migrant workers are in aggregate more productive than local workers on a like-for-like basis, reducing skilled inward migration, or diverting those workers elsewhere, may have implications for U.S. productivity and thus trend growth. There is a pontification of central bank speakers today, including two chief economists, and the comments of any chief economist should always be listened to with reverential attention.
Pearl of the Bank of England is of some interest to markets, as there is still uncertainty about the nature of UK monetary policy, but the frequently divided decision-making process at the Bank of England does lessen the impact of a single voice. Lane at the ECB is less likely to provoke a market response, as the assumption is that, at least for now, the European Central Bank is done with policy moves. The Federal Reserve is indulging in a mass rush to the public stage, as policy makers are freed from the restrictions of the communications blackout.
Of perhaps most interest right now is Fed Governor Mirren. One cannot know, given that the fabled dot plots are anonymous, but the assumption is that Mirren is expecting dramatic interest rate reductions this year. It will be interesting to know why Mirren has such a pessimistic view of the US economy, as if this view is economically based, it seems to suggest that Mirren believes the economy is already in recession, or very, very close to it.
Mirren is speaking at the Economic Club of New York, which may allow for some intelligent questions. Of the other speakers, Fed President Williams is the one most likely to be of interest to financial markets, as one of the leading economists at the Federal Reserve. That's all for today.
Have a good day. This material has been prepared and published by the Global Wealth Management Business of UBS Switzerland AG, regulated by FINMA in Switzerland. It's subsidiaries, or affiliates, collectively referred to as UBS.
In the USA, UBS Financial Services Inc. is a subsidiary of UBS AG, and a member of FINRA SIPC. The investment views have been prepared in accordance with legal requirements designed to promote the independence of investment research. This material is for your information only, and it is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product.
The analysis contained herein does not constitute a personal investment recommendation, or take into account the particular investment objectives, investment strategies, financial situation, and needs of any specific recipient. This material may not be reproduced or copies circulated without prior authority of UBS. Please visit www.ubs.com forward slash CIO hyphen disclaimer to read the full legal disclaimer applicable to this material.
How we cover this story
Live cross-firm bank consensus across 30 desks — FX, oil & gold
View bank forecasts