USDKRW continues to push higher, with....>

KOREAN WON: USDKRW continues to push higher, with today's price action

confirming the break above its 100DMA. The next key level of resistance comes in

at 1100, corresponding to the February 6 high and the 200DMA.

- The USDKRW's rise was fundamentally driven as 2-year yield spreads between the

U.S. and Korea, after adjusting for long-term inflation expectations, headed in

the U.S. favour. Even as Korean interest rate expectations continue to rise,

they are not rising as fast as in the U.S.

- While Korea's 5-year CDS spread edged lower, it did not fall enough to offset

the impact of higher U.S. real yields.

-The won has weakened for four consecutive days now but the weakness has not

significantly reduced it's overvaluation based on the historical correlation

with default risk-adjusted real yield spreads.

- USDKRW remains ~8% lower than the level justified by the fundamentals, meaning

that further gains are highly likely in the absence of a major reversal in the

U.S. Fed's hiking cycle or a hawkish shift by the BOK.