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USDKRW has moved back below its 50DMA....>

KOREAN WON
KOREAN WON: USDKRW has moved back below its 50DMA and 100DMA, currently at
1,072, but continues to trade within the tight range established since the start
of the year. With the USD weakening globally, the won's trade-weighted index
continues to appreciate, which is likely to cause headaches for the BOK which
has previously noted its reluctance to allow the won to appreciate. 
- Korean reserve data will be released tomorrow and will likely show the BOK's
dollar holdings rising over US$400bn as the bank seeks to stem the won's advance
amid a massive current account surplus. 
- However, the potential for portfolio outflows to resume is increasing as
interest rate differentials between Korea and the US hit new highs in the US's
favour. Based on the tight correlation between default risk-adjusted real yield
spreads and USDKRW over the past decade, MNI estimates that the won is currently
~10% overvalued. 
- An additional factor acting against the won in the near term is the renewed
weakness in the Chinese yuan, the regional FX bellwether. The USDCNH is heading
towards its 200DMA and a break of this level could establish a yuan bear market.

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