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SOUTH KOREA: USD/KRW resumed the pronounced uptrend seen mid-last week Tuesday,
topping out at 1,168.25 to hit the best levels since late January 2017. KRW is
now comfortably the worst performing currency globally Tuesday, down close to 1%
against an already weak USD.
-After domestic growth fears sparked the KRW sell-off last week, China growth
fears triggered the moves today, with poor Chinese data (official manufacturing,
official non-manufacturing and Caixin manufacturing PMI all missed forecast)
amid holiday-thinned liquidity was the catalyst for KRW underperformance during
the Asia-Pac session. This cemented the negativity around South Korea after
industrial production for March also missed expectations (-2.8% Y/Y vs. Exp.
-1.0%) and Samsung's underwhelming earnings report.
-Despite recent KRW weakness, options markets remain relatively sanguine, with
USD/KRW 1m risk reversals below recent highs of 0.92 points, but still
comfortably north of the YTD average. USD/KRW options volumes are unsurprisingly
higher than average, with the larger including a $250mln 1,185 call strike
expiring on June 20th. Spot hasn't traded at that level in over 2 years.