Key Moments
- Bank of America projects the USD/KRW rate at 1,395 by the end of 2026, anticipating won appreciation from current levels.
- Persistent retail portfolio outflows are identified as the main force pressuring the Korean won lower.
- A recent capital gains tax cut on foreign equity sales and potential additional incentives are highlighted as key policy tools that could support the currency.
BofA’s 2026 Outlook for the Korean Won
Bank of America is forecasting a stronger Korean won against the U.S. dollar in 2026, setting a year-end target of 1,395 for the USD/KRW exchange rate. This projection comes even as the currency currently faces downward pressure.
According to the bank’s analysis, existing policy measures have not been sufficient to arrest the won’s weakness. The U.S. Treasury has publicly acknowledged the softness in the currency, and Bank of America expects that political momentum to stabilize the exchange rate will build if the pressure persists.
Government Policy Response and Tax Measures
Bank of America identifies large-scale portfolio outflows from Korean retail investors as the dominant factor weighing on the won. In response, the Korean government introduced a cut to capital gains taxes on sales of foreign equities on December 23, 2025. The bank views this move as an initial effort to address the imbalance in flows.
The analysis further suggests that additional tax-related incentives could play a role in improving supply-demand dynamics in Korea’s foreign exchange market. Such measures are seen as potential tools to moderate outflows and support the currency.
Retail Flows, U.S. Tech Exposure, and FX Dynamics
Bank of America notes that Korean investors hold a substantial share of their overseas equity exposure in U.S. technology names. This concentration is identified as an important factor in the outlook for the won.
In its assessment of the currency’s prospects for 2026, the bank points out that a significant downturn in the U.S. technology sector could become a catalyst for the Korean won. A major correction would likely encourage Korean investors to bring funds back onshore, generating repatriation flows that could strengthen the currency.
Key Forecast and Policy Elements at a Glance
| Item | Detail |
|---|---|
| Target USD/KRW by end-2026 | 1,395 |
| Main source of current won weakness | Large portfolio outflows from retail investors |
| Recent policy step | Capital gains tax cut on sales of foreign equities implemented on December 23, 2025 |
| Potential policy support | Additional tax incentives to improve FX supply-demand conditions |
| Key positioning factor | Heavy Korean retail exposure to U.S. technology stocks |
| Potential FX catalyst | Major correction in U.S. technology sector prompting repatriation flows |
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
