USDKRW is trading sideways as it..............>

KOREA: USDKRW is trading sideways as it consolidates above its 50DMA and 100DMA.

We continue to expect a push higher towards the next key level of resistance at

1,100 as the pair moves more in line with recent trends in real yield spreads.

- Korean 2-year swaps rose significantly today and currently stand at 2.07%,

57bps above the overnight policy rate. The rise is not being driven by higher

inflation expectations or default risk - both of which remain firmly on downward

trends - suggesting that investors are increasingly anticipating tighter

monetary conditions which should be bullish for the won.

- However, the won is unlikely to strengthen given how overvalued it is relative

to the spread of real yields between the U.S. and Korea. While Korean real

yields are still higher, even after adjusting for default risk, the spread is

much lower than it has been over recent years and suggests USDKRW should be ~8%

higher.