Won Rebounds Overnight, Trade Data In Focus Today

1 month USD/KRW fell sharply late in NY trading. We finished at 1287.45, down from earlier highs above 1300. This was in line with lower DXY levels, although the won outperformed weaker equity sentiment, particularly in tech. Note onshore spot closed yesterday at 1298.80.

• The equity leads for Korean stocks remain poor today. The SOX fell a further 1% overnight, bringing the week to date decline to just over 6%. US chip giant Micron stated industry demand has weakened. The MSCI IT index also fell by 1.5%.
• Yesterday the Kospi shed close to 2%, while offshore investors sold $307mn of local shares. For June, net outflows were just under $4.8bn.
• Against continued equity headwinds it will be interesting to see if the won can maintain its late NY surge.
• Late yesterday, the BoK reported that it sold $8.3bn in Q1 to defend the won, the largest on record, although BoK has only been reporting such figures since 2019. It's likely the central bank sold more in Q2, as headline FX reserves are already down more in this quarter to date, although no doubt valuation effects are playing a role.
• The focus today is on the June export figures print. The market looks for a sharp slowing in export growth to 3.8% YoY from 21.3% in May. Import growth is expected to remain elevated at 22.0% (from 32%), leaving a wider trade deficit at -4315mn expected (-$1710mn previously). Also out is the June PMI, which printed at 51.8 previously.