Why Is KRW So Weak?

Research evidence excerpt

Why Is KRW So Weak?

Idea

July 9, 2026 02:50 AM GMT

Morgan Stanley Asia Limited+MKorea Macro Strategy, Equity Strategy & Economics Gek Teng Khoo

| Asia Pacific Strategist

Gek.Teng.Khoo@morganstanley.com +852 3963-0303

Kathleen Oh

Chief Korea/Taiwan EconomistWhy Is KRW So Weak? Kathleen.Oh@morganstanley.com +852 2848-7340

Morgan Stanley & Co. International plc, Seoul Branch+

KRW has been one of the weakest AXJ currencies YTD despite Joon Seok

strong fundamentals. We see scope for moderate KRW EquityJoon.Seok@morganstanley.comAnalyst +82 2 399-4934

appreciation as corporate FX conversion may increase, while Heewon Choi

foreign equity outflows continue, albeit at a slower pace. Korea Equity Analyst

Heewon.Choi@morganstanley.com +82 2 399-4836

retail is looking overseas but outflows seem manageable in Minseo Kang

2H26. ResearchMinseo.Kang@morganstanley.comAssociate +82 2 399-4816

Morgan Stanley Asia (Singapore) Pte.+

Key Takeaways Kristal Ji

Equity Strategist

KRW has underperformed in AXJ despite a record current account surplus, strong Kristal.Ji@morganstanley.com +65 6834-6949

GDP growth, a surging equity market, and improving terms of trade.

This has been driven by large equity outflows from foreign investors and

exporters' FX conversion possibly lagging the surge in the current account

surplus.

We see equity outflows from foreign investors persisting in 2H26 but at a slower

pace. Korean retail investors are looking overseas but outflows seem

manageable.

We stay positive on Korea's fundamentals, expecting growth to outperform the

US, the trade surplus to stay robust, and the interest rate differential to narrow.

KRW may appreciate moderately as a rise in corporate FX conversion is offset by

equity outflows. Yields to stay elevated amid BoK rate hikes and strong macro.