TD Securities expects the Korean Won (KRW) to weaken, with USD/KRW retracing higher toward 1400 as markets rotate out of the AI build-out theme and global equities remain under pressure. They highlight KRW’s unusually high positive correlation with US and relative US vs RoW equities, arguing that persistent AI-led equity weakness should drive further KRW losses versus the Dollar and on crosses.

Equity correlations point to Won weakness

"As for KRW, we continue to hold the view that USDKRW could retrace toward 1400. The Chart of the Week shows each major currency's one-year correlation to the standalone US equity market, and to the US vs RoW equity market ratio."

"Idiosyncratically, KRW has the highest positive correlation to the relative US vs RoW equity ratio and positive correlation to the standalone US equity market."

"As a result, in the case that the AI-led global equity rout persists, KRW should continue to retrace its year-to-date gains both against the USD and on the crosses. FX carry and value factors provide further confirmation of this view. While the Bank of Korea has hiked rates modestly in 2026, the level of KRW yield remains low in a global context."

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