Bank of America has issued a forecast indicating that the Korean won is likely to recover and appreciate relative to the U.S. dollar by the close of 2026, with a target exchange rate of around 1,395 per dollar. This outlook comes amid ongoing pressures causing the won to weaken at present.
The bank's detailed examination suggests that the remedies currently employed by the Korean government have not sufficed to arrest the won's depreciation. This debilitation has attracted official attention, including public remarks from the U.S. Treasury highlighting the currency's vulnerability, while political motivations to stabilize the won are expected to heighten with continued currency instability.
Analysis points to substantial portfolio withdrawals led by retail investors as the predominant factor underpinning the won's ongoing weakness. In response, on December 23, 2025, Korean authorities implemented a capital gains tax reduction applicable to the disposal of foreign equity holdings, an initiative viewed by Bank of America as a preliminary step in mitigating outward capital flows.
Bank of America suggests that additional fiscal incentives could play a vital role in rebalancing supply and demand dynamics within the Korean foreign exchange market. Notably, Korean investors maintain a significant allocation to U.S. technology equities, which presents a key dynamic influencing currency movements.
The bank's projections indicate that any considerable downturn in the U.S. technology sector could incentivize investors to bring funds back to Korea, potentially reinforcing the won. This interplay between sector-specific movements in foreign equity markets and domestic currency valuation is central to the bank's assessment for 2026.