KRW Weakens Modestly After Recent Run Higher

The won is mostly weaker against a G10 basket of currencies, The exception being NOK/KRW which has dropped as oil prices fall on the back of increased virus cases worldwide sparking speculation of further lockdowns and thus lower demand. USD/KRW last at 1082.45 after opening at 1081.00.

• It looked like it was going to be a familiar story in Asia after the pair dropped as low as 1080.90 but some DXY strength pushed the pair to a session high of 1084.40. The pair plunged through the psychological 1100 barrier last week, most of the option activity in USD/KRW predicts the pair holding lower this week. $450m of KRW calls roll off at 1105 tomorrow, a further combined $1.2bn KRW calls roll off between 1120 and 1150 later this week.
• USD/KRW has gained almost 7% in Q4, which caused some concern the central bank could intervene to protect exporters. However, it does not seem to have had too much of an impact on exporters yet, with data last week showing largest current-account surplus since September 2017.
• Bank of Korea Governor said at the policy meeting in November the bank would step in to curb herd behaviour in FX, but did note that appreciation appears to be having less of an impact on export performance than in the past.
• There are headwinds for the won. South Korea is raised its Covid-19 alert level over the weekend as it struggles with a rise in infections. Gatherings of more than 50 will be banned in the from Tuesday, while gyms and karaoke bars will be closed. On Sunday 631 new infections were reported, the highest single day figure in nine months.