Free Trial

Holding On To This Week’s Gains

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access

Executive summary

  • Bank of Korea decided to follow CEEMEA/Latam central banks and has embarked into a tightening cycle in the past six months to ease the rising inflationary pressures.
  • However, South Korea’s biggest trading partner China is keeping its ‘zero-Covid policy’, which has been constantly weighing on growth expectations in the past year and therefore could impact Korean economic activity in the medium term.
  • A significant slowdown in the economic activity combined with a deceleration in global liquidity could lead to greater volatility in 2022 and therefore weigh on Korean domestic assets and the KRW.

Link to full article:

South Korea SLowdown.pdf

The Korean won has also been acting as a ‘risk-on’ currency in the past 30 years, which tends to depreciate significantly in periods of rising volatility (i.e. VIX). The chart below shows the strong co-movement between JPYKRW (risk off pair) and price volatility (VIX) in the past thirty years. As growth expectations in SK continue to fade in 2022 and global liquidity continues to decelerate, risky assets could experience greater volatility this year, which would be negative for the KRW.

Source: Bloomberg/MNI

MNI London Bureau | +44 203-865-3850 |
MNI London Bureau | +44 203-865-3850 |

To read the full story

Why Subscribe to

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.