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Societe Generale On What Can Be Done To Stem KRW Weakness

KRW

Societe Generale “don't anticipate that the policy measures currently being discussed (sharp BoK hikes, U.S.-Korea FX swap line, NPS FX hedge resumption, among others) will prevent USD/KRW from rising. We fear that a sharp BoK hike could have the adverse side effect of a deeper Korean equity sell-off (foreign outflows), thereby exerting greater upward pressure on USD/KRW. In our view, neither is there a practical domestic policy option that can improve the trade balance amid higher crude and grain prices. Instead, we think a more viable option to mitigate a rise in USD/KRW is a financial/industry policy that improves risk sentiment around Korean equities, if such a policy could be engineered and introduced. The June trade balance will likely see a large deficit, but falling commodity prices since mid-June and improved export logistics after the transport union strike could help the Korean won later.”

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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