MUFG expects the South Korean won (KRW) to perform better in a de-escalation scenario. It also notes KRW could be exposed if conflict lasts longer and oil prices rise.<\/p>\n
The bank links support for South Korea to a continuing AI and technology cycle. It adds that risks remain from higher oil prices and possible pressure on energy supplies.<\/p>\n
South Korea\u2019s National Pension Service (NPS) is ending a long-standing 15% cap on foreign exchange hedging. The 15% level will now be used as a baseline ratio instead.<\/p>\n
NPS aims to gain more flexibility during periods of market volatility. FX hedging is set to become a standard part of overseas investment policy, rather than something used only in unusual conditions.<\/p>\n
The article states it was produced with an AI tool and reviewed by an editor.<\/p>\n
Given the powerful tailwinds from the AI and technology cycle, we should consider building long positions in the South Korean Won. Recent data supports this, as South Korea’s semiconductor exports surged over 50% year-on-year in the first quarter of 2026, pointing to sustained global demand. This underlying economic strength provides a solid foundation for KRW appreciation against other currencies.<\/p>\n
The structural policy shift from the National Pension Service (NPS) is another key reason to be bullish on the Won. By making its 15% currency hedge a baseline instead of a cap, the NPS is set to become a more consistent buyer of KRW. Considering the NPS managed over $850 billion in assets at the end of 2025, this change will create significant and steady demand for the local currency over the medium term.<\/p>\n
This change is particularly timely, as we saw the USD\/KRW pair test the 1400 level several times during market stress in 2025. The current environment appears to be a turning point, suggesting now is an opportune moment to position for a stronger Won. We should therefore look at buying USD\/KRW put options or KRW call options with expirations in the coming months.<\/p>\n
While the base case is for de-escalation in global conflicts, we must remain mindful of risks from higher energy prices. Brent crude is currently trading above $90 a barrel, which could create headwinds for an energy importer like South Korea. It may be prudent to hedge some of our bullish KRW positions with cheap, out-of-the-money puts to protect against a sudden spike in geopolitical risk.<\/p>\n","protected":false},"excerpt":{"rendered":"
MUFG sees KRW outperforming if tensions ease; prolonged conflict, higher oil threaten; NPS loosens FX hedging cap.<\/p>\n","protected":false},"author":87,"featured_media":0,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[33],"tags":[],"class_list":["post-44717","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t