Korean Won: On the Way to Strengthening in 2026 – Bank of America forecast

Bank of America (BofA) has published an optimistic forecast for the future of the KRW (Korean won), predicting its further strengthening by 2026. According to the bank's analysts, favorable macroeconomic conditions, a combination of increased trade turnover, government support and the dynamics of the foreign currency will create a solid foundation for the steady growth of the national currency (Korean won) of South Korea. A key factor determining these prospects is the powerful growth cycle of semiconductor manufacturing, which, according to BofA, will lead to a "supercycle of memory chips."

The Semiconductor Supercycle as a growth engine

Central to Bank of America's argument is the phenomenon of the "memory microcircuit supercycle." This unprecedented growth in demand and production of semiconductors, especially memory chips, has a profound impact on the South Korean economy. The country is a world leader in this industry, and its semiconductor exports account for a significant share of GDP.

BofA notes that this super cycle is already leading to a record trade surplus. The increase in semiconductor exports significantly exceeds imports, which leads to an influx of foreign currency into the country. This surplus is a direct indicator of Korea's strengthening foreign position and creates favorable conditions for the KRW (Korean won).

In addition to the trade balance, the supercycle also contributes to the growth of corporate deposits in foreign currency. Korean semiconductor manufacturing companies earn significant revenues from exports, which are then accumulated in the form of deposits in foreign currency. This increases the country's foreign exchange reserves and strengthens its ability to withstand external shocks, which in turn has a positive effect on the stability and value of the won.

A multi-element foundation for sustainable KRW growth

Bank of America emphasizes that the strengthening of the won in 2026 will be based on a "solid multi-element foundation." In addition to the semiconductor supercycle, these elements include:

Trade turnover growth: Korea's total trade volume is expected to continue to grow, supported not only by semiconductors, but also by other export industries. Export diversification and sustained global demand will contribute to further inflows of foreign currency.

Government support: The South Korean government actively supports key sectors of the economy, including the semiconductor industry, through investments, subsidies, and a supportive regulatory environment. This support promotes innovation, increases competitiveness and, as a result, strengthens the economy as a whole.

External currency dynamics: The favorable dynamics of the external currency, driven by strong exports and capital inflows, will contribute to the further strengthening of the won. The increased demand for Korean assets and goods from foreign investors and consumers will support the high value of the national currency.

USD/KRW forecast and risks

According to Bank of America forecasts, by the end of 2026, the USD/KRW exchange rate will be 1.395. This means a significant strengthening of the won compared to current levels. It is important to note that BofA indicates that "the risks are shifted towards further strengthening of the won." This means that there is a possibility that the won could strengthen even more than predicted if favorable conditions persist or even improve.

Conclusion

The Bank of America forecast paints an optimistic picture of the future of the Korean won. The powerful semiconductor manufacturing growth cycle, which BofA calls the "memory chip super cycle," is a key driver of this strengthening. Combined with the growth of trade turnover, government support and the favorable dynamics of the foreign currency, these factors create a solid foundation for the sustainable growth of KRW. Investors and market participants should closely monitor developments in South Korea.