KRW Surges On Confirmation Of Government-NPS Swap Deal

KRW the clear regional FX outperformer as Asia hands over to London, with the won rallying by the best part of 1% vs. the USD. This comes in lieu of the confirmation that South Korean FX authorities and the country’s National Pension Service have agreed on the setup of an FX swap facility of up to US$35bn, which will be in place until the end of this year. This allows the NPS to ease the risks surrounding FX vol., managing the FX exposure of its investments, while the FX authorities beef up a tool that allows it to attempt to address any supply-demand imbalances.

• USD/KRW pulled back from just below the YtD peak on the news, with initial technical support seen at the uptrend support line drawn off the YtD low (KRW1,302.80). Spot sits at KRW1,313.50 into the close, off session lows of KRW1,308.45 (the facility setup didn’t come as a surprise, with such a move touted for a little while, with the facility superceding the $10bn line put into place last year).
• One matter to be aware of in the coming weeks is the corporate dividend schedule for South Korean firms. BBG data points to KRW4.59tn of dividends due to overseas investors through the month (slightly lower than the KRW4.92 seen last year). The bulk of the payments will take place between mid- & end-April.