BoK Expects Trade Deficits To Continue

The Bank of Korea has released commentary around the country's trade deficit position. The BoK expects deficits to persist in the near term. This is one key factor that is likely to keep the market in buy the dip mode for USD/KRW. Today was a good example of this ~ lows of 1364, before rebounding to 1375. Other factors were clearly at play as well (weaker CNH, JPY levels). Below we highlight some key media snippets from the BoK report.

• Nearly 80% of the total decrease in the trade balance so far this year has resulted from a surge in oil prices.
• With global oil prices staying at a high level, the country is expected to see the trade deficit continue for the time being due to eased growth of exports and a rise in imports as the global economy is slowing down.
• If global oil prices fall by a yearly average of $10 per barrel, South Korea's trade deficit could decline by $9.3 billion.
• The country is still expected to post a current account surplus this year, despite the trade headwinds. Note last month the central bank nudged the 2022 forecast down to $37bn from $50bn (the May estimate).