USDKRW is back above 1120, currently.....>

KOREAN WON: USDKRW is back above 1120, currently trading at 1121.4 as up

trendline support from the June lows remains intact. 

- Last week saw the won strengthen in line with the recovery in Korean stocks,

despite both a further widening of nominal and real rate spreads between the US

and Korea, as well as a slight uptick in Korean CDS spreads - conditions that

have previously resulted in won weakness. 

- This resulted in USDKRW now trading at a new record low relative to fair value

based on the historical correlation between the pair and the risk-adjusted real

2-year yield spread, which suggests the rate should be trading at multi-year

highs of 1250. 

- With the FX authority calling the pace of won gains on Friday 'excessive', it

would likely take a further strong rally in Korean stocks to prevent a

resumption of the USDKRW uptrend.