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SOUTH KOREA
SOUTH KOREA: USD/KRW gapped higher Thursday, finishing at the best levels since
early 2017 in the second consecutive session of sharp underperformance for the
KRW. South Korean GDP was woeful overnight, turning out the worst quarterly
reading since the Global Financial Crisis. The move in USD/KRW also prompted the
usual talk of official intervention in the FX rate - stressed later in the
session by South Korean officials, who stated they will intervene in FX space if
required.
-Options markets have taken note. Following yesterday's spate of USD/KRW call
buying, 1m risk reversals have gained further, and look to trade at levels most
in favour of KRW puts since December last year.
-SocGen overnight noted that the KRW's underperformance of late may be a strong
signal to start establishing more broad-based short EM positions due to the
cyclical nature of the South Korean currency. SocGen eye USD/KRW rising as high
as 1,200 by 2020, with recent weakness reinforcing this view.
-Resistance noted at the March 10 2017 high of KRW 1,162.98.
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