Korean interest rate swaps have moved...>

KOREA RATES: Korean interest rate swaps have moved lower in response to the

BOK's decision to hold rates at 1.50% today, despite the hold being widely

anticipated by analysts. The 1-year swap currently sits at 1.83%, down 3bps from

before the meeting. The 2-year swap edged down 4bps and is now pricing in

exactly two 25bps hikes over the next two years, down from 63bps this week.

- Policymakers remain concerned over below-target inflation figures and the

potential for trade tensions between the US and China to deliver a global trade

slowdown, which would leave the export-dependent country at risk.

- Despite the move lower in rates, the won remained resilient as real yield

differentials were supported by the relatively dovish Fed minutes released

yesterday. USDKRW continues to hover around 1,079, consolidating between its

100DMA and 200DMA. We continue to see the pair gearing up for a large move

higher as real interest rate spreads continue to move in the greenback's favour

and historical correlations suggest USDKRW should be roughly 10% higher.