The KRW is currently underperforming due to increased tariffs announced by US President Trump. The tariffs will rise on South Korean imports of automobiles, timber, and pharmaceuticals from 15% to 25%.
Reduced capital outflows are providing a cushion to the KRW despite the rising tariffs. The overall economy is feeling the drag from the higher tariffs, but this financial support is maintaining a level of currency stability.
Australian Consumer Price Index Projections
Australia’s Consumer Price Index is projected to rise 3.6% year over year, surpassing the previous reading of 3.4%. The expected monthly CPI is 0.7% after a zero percent outcome in November.
The US Dollar Index has dropped to levels not seen since 2022. Factors include diversification, economic slowdown concerns, and FX intervention rumours.
XRP is struggling to sustain above $2.00 despite stable ETF demand, trading around $1.88. The token is under pressure amid a weak technical market structure.
The new US tariffs aimed at key South Korean exports, such as automobiles and pharmaceuticals, present a clear headwind for the Korean won. We see this as an opportunity to position for KRW weakness against the US dollar. In the coming weeks, traders should consider buying call options on the USD/KRW pair to capitalize on its expected rise.
US Tariffs And The Korean Won
This tariff threat is significant because the US is a critical market, with automotive exports alone accounting for over $30 billion annually in recent years. We saw during the trade disputes of 2018-2019 that similar actions led to significant currency depreciation and market uncertainty. This historical precedent suggests the won could re-test the weaker levels we saw during the economic slowdown of 2025.
The negative impact will likely extend beyond the currency market to South Korean equities, especially within the KOSPI index. Major exporters like Hyundai and Samsung Electronics are highly exposed to any disruption in trade with the United States. Therefore, buying put options on the KOSPI 200 index could be a prudent strategy to hedge against or profit from a potential market decline.
While the outlook is negative, we must acknowledge the cushioning effect of reduced capital outflows, which has prevented a more drastic slide in the won so far. The Bank of Korea has maintained a relatively stable policy, which has provided some support for the currency. We should monitor implied volatility in KRW options, as a sharp increase could signal that this supportive factor is starting to weaken.
It is also important to note the broader context of a weakening US dollar against other major currencies. This makes the KRW situation unique, suggesting a potential pair trade of being long USD/KRW while being short the US dollar against a stronger currency like the euro. This tariff-driven risk also reinforces the appeal of safe-haven assets, which helps explain the recent strength we’ve observed in gold.
