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KRW: Spot Near 1450, Focus On NPS Strategic Hedging

KRW
EM BulletBulletSouth KoreaAPACEmerging Market News

Spot USD/KRW has opened a little firmer in early Friday dealings, we were last near 1450/51. On Thursday we drifted a little lower, but saw support sub 1445. 

  • The won likely saw some benefit from other higher beta plays moving away from post Fed lows against the USD on Thursday, but overall moves were modest.
  • There was also focus on the extension of the BoK/National Pension Service (NPS) Swap facility into 2025, which was also raised to $65bn from $50bn. The strategic hedging cap of 10% would also remain in place for NPS.
  • Bloomberg also noted that the NPS would be obligated to hedge if USD/KRW holds above 1450. It stated "If the average closing exchange rate exceeds about 1,450 for five business days, the NPS will implement strategic hedging, the people said. Once activated, strategic currency hedging will continue unless the exchange rate drops significantly, they said." (see this link for more details).
  • Still, another BBG article this morning, which included comments with a BoK official, stated NPS strategic hedging level has not been triggered yet (see this link).
  • Given the elevated levels of USD/KRW, fresh highs back to 2009 for the pair, it is likely to remain a focus point for the authorities. Recent highs rest at 1460.2, while the 20-day EMA continues to trend higher, last near 1423. 
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Spot USD/KRW has opened a little firmer in early Friday dealings, we were last near 1450/51. On Thursday we drifted a little lower, but saw support sub 1445. 

  • The won likely saw some benefit from other higher beta plays moving away from post Fed lows against the USD on Thursday, but overall moves were modest.
  • There was also focus on the extension of the BoK/National Pension Service (NPS) Swap facility into 2025, which was also raised to $65bn from $50bn. The strategic hedging cap of 10% would also remain in place for NPS.
  • Bloomberg also noted that the NPS would be obligated to hedge if USD/KRW holds above 1450. It stated "If the average closing exchange rate exceeds about 1,450 for five business days, the NPS will implement strategic hedging, the people said. Once activated, strategic currency hedging will continue unless the exchange rate drops significantly, they said." (see this link for more details).
  • Still, another BBG article this morning, which included comments with a BoK official, stated NPS strategic hedging level has not been triggered yet (see this link).
  • Given the elevated levels of USD/KRW, fresh highs back to 2009 for the pair, it is likely to remain a focus point for the authorities. Recent highs rest at 1460.2, while the 20-day EMA continues to trend higher, last near 1423.