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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
KRW
The South Korean Finance Minister has stated the authorities will step in if excessive FX moves are seen in the market. Choo, the Finance Minister, added it was not appropriate to talk about specific levels in terms of USD/KRW.
- Even with this latter point, it is not surprising the comments from Choo came as USD/KRW got to fresh cyclical highs. Earlier in the session, spot USD/KRW traded around 1295, while we now sit back below 1290.
- Lower USD/CNH levels (which is back sub 6.6800), have also aided the downshift in USD/KRW.
- Besides not wanting to see herd behavior in FX markets, the other focus point will be the weaker FX rate translating into stronger imported inflation pressures.
- In its last Monetary Policy report, the BoK noted the weaker won was adding to domestic inflation pressures, with the pass-through estimated at 0.06 in Q1, the strongest rate since Q4 2017 (see this link for more details).
- Bringing down inflation is a key focus for the South Korean government.
- The suggests a break above 1300 is unlikely to come easy, although if we see further broad based USD strength, the authorities may not defend 1300 that aggressively and be more concerned about isolated/uncorrelated periods of won weakness.
- The won NEER is just up from fresh multi-year lows according to the J.P. Morgan estimate, see the chart below.
Fig 1: J.P. Morgan KRW NEER
Source: J.P. Morgan/MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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