TD Securities Recommend Short USD/KRW Tactical Trade

TD Securities enter a tactical short USD/KRW trade at KRW1,147.15, targeting KRW1,080.35, with a stop loss at KRW 1,180.55.

• They note that the KRW has "faced pressure amid increasing virus cases and a firmer USD. However, we think much of the bad news in terms of COVID cases and tighter social distancing restrictions is in the price (KRW dropped over 4% since the beginning of June). We also think the USD is likely to move into a range after recent gains while our preference is to favour currencies that have the most hawkish central banks. In Asia, Bank of Korea fits into this category, with a policy rate hike likely in October 2021, the first in our view to hike in the region. Moreover, we do not expect the COVID growth impact to be significant, and notably Korea's consensus growth forecasts continue to be revised higher. As revealed in the BoK policy decision today, the Bank remains hawkish highlighting only a "temporary setback". Data remains positive, especially on the trade front, with June exports and imports growing around a solid 40% y/y. Semiconductor exports are particularly strong and as such portends to a relatively firm growth outlook, with GDP likely to increase by around 4% over 2021 after falling by -0.9% in 2020."