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Equity Weakness & Outflows Tempering Further Gains

KRW

1 month USD/KRW is still finding some support sub 1300. The low for today is at 1297.50, while we currently sit just above 1300. Yesterday's lows were around 1295, while overnight highs came in at 1307.

  • Curbing further downside in the pair has been local equity market weakness, with the Kospi off 1.1% so far today, with offshore investors selling more than $200mn of local shares.
  • The equity trends look to be more profit taking rather than a fresh bear market. The Kospi has met resistance around the simple 200-day MA over recent sessions (2496.37, versus current levels of 2453.40).
  • There is a modest divergence between the 1 month and the Kospi trend, but it isn't large by historical standards, see the chart below.
  • The other headwind for the won will be slightly higher USD/CNH levels, with this pair pushing back above 7.0600. A firmer yen backdrop will be countering this to some degree, but USD/JPY is yet to break through 135.00.

Fig 1: USD/KRW 1 Month (Inverted) & The Kospi

Source: MNI - Market News/Bloomberg

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