Goldman Sachs: Won (KRW) Rebound in 2026

Goldman Sachs: Won (KRW) Rebound in 2026

The Korean won has maintained its previous judgment that it is likely to rebound in 2026. The won’s weakness in the second half of 2025 is considered an unusual trend given the firm recovery of Korean exports, the country’s strategic position in the global tech supply chain, and the KOSPI’s 70% rise since mid-April. The gap appears to stem from large overseas portfolio purchases by local investors, supported by a sharp year-on-year expansion of overseas investment to reach $100 billion in the January-September period. There are a number of factors to support the won’s rebound in 2026.

First, macro fundamentals improvement. As global demand for AI-related technologies continues, Korean exports are likely to maintain a strong trend. The GDP growth rate is expected to rise from 1.1% in 2025 to 2.2% in 2026, and the current account surplus is also expected to expand from 4.9% to 6% of GDP. This is a factor that clearly improves the basic fundamentals of the won and the supply and demand of foreign exchange.

Second, there is a possibility of a change in the allocation of assets in the National Pension Service (NPS). As leadership changes are scheduled in the future, the focus of asset allocation may partially return to domestic stocks, which is also consistent with the government’s ‘value-up’ policy. This is a factor that can alleviate the net outflow pressure of institutional investors to invest abroad. Considering the case where the National Pension Service’s FX hedging program implemented from January to June 2025 supported the strengthening of the won in the first half of the year, there is a possibility that similar policy support will resume. According to local reports, the government has already formed a consultative body to discuss ways to contribute to the stabilization of the won by the National Pension Service.

Third, there is a possibility of a policy to ease the outflow of individual foreign investment funds. As the flow of individual foreign investment has acted as upward pressure on USD/KRW, authorities may consider providing tax benefits for individual FX hedging. This may contribute to easing the imbalance between supply and demand of won in the short term.

Fourth, the effect of incorporating Korean government bonds into the FTSE WGBI began in earnest in 2026. The incorporation of WGBI takes place in an equal proportion per month from April to November 2025, and the total passive inflow is estimated to be about $60 to $70 billion. Of this, about $20 billion seems to have already been shelved in 2025, and there is a possibility of an additional $40 to $50 billion in passive inflow in 2026. This expands structural demand for Korean products and acts as a strong factor in the won.

In terms of interest rates, it maintains a two-year IRS receiving strategy. The market partially reflects the possibility of a further hike by the Bank of Korea, but we believe the Bank of Korea has more room for another cut. CD rates are also likely to normalize after the disappearance of special factors at the end of the quarter, so short-term interest rate spread adjustments are expected to act favorably on IRS receiving positions.

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