A four-month decline in South Korea’s currency has vindicated the call of won bears. All signs point to more weakness ahead.

The currency could fall to 1,200 per dollar by December as exports moderate and the dollar strengthens on expectations for a tighter U.S. monetary policy, according to DB Financial Investment Co. and NH Futures Co. A technical indicator also signals it could test that level, which implies a drop of over 1% from where it’s currently trading.

The won is among Asia’s most risk-sensitive currencies given South Korea’s links to the global supply chain, and its performance often sets the tone for moves in regional peers. The currency’s slide to a one-year low in September has validated calls from Citigroup Inc. and Kiwoom Securities Co., which predicted that stock outflows and challenges in the tech sector would pose a risk.

“There will be consistent underlying momentum for the greenback as markets enter the phase of tapering,” said Kim Seunghyuk, a foreign-exchange analyst at NH Futures. “Risks for South Korea include the possibility of a narrowing trade surplus, as well as uncertainties over China’s crackdowns and company defaults that continue to linger.” 

The won has lost more than 6% since end-May as the dollar gained and South Korean authorities tightened restrictions to curb a rise in virus infections. Stock outflows have added to the pressure, with overseas investors withdrawing $7.9 billion from local equities this quarter.

South Korea’s currency tumbled to a one-year low of 1,188.55 on Wednesday before paring losses to trade at around 1,184.05.

The won’s weakening outlook mirrors the easing momentum in South Korean exports as the delta strain and slowing Chinese growth crimp demand. A report due Oct. 1 is likely to show shipments increased 16% in September from a year earlier, after rising almost 35% in August, according to a Bloomberg survey of economists.

A technical indicator suggests the won could drop toward 1,200 with slow stochastics signaling that the currency has yet to reach oversold levels.

“Global customers are likely to purchase more services than industrial products as vaccinations pick up,” said Moon Hongcheol, a fixed-income and FX strategist at DB Financial. “As a country that exports more goods than services, Korean shipments are already showing signs of slowing down.”