USDKRW leapt above its 55-dma as.........>

KOREAN WON: USDKRW leapt above its 55-dma as trading resumed following

yesterday's holiday, and is challenging the Sep 18 high at 1130.25. The

short-term downtrend from the Aug 14 high has given way suggesting a bull flag

pattern could be playing out, targeting a new cyclical high.

- Won weakness has come despite a 3.5bps rise in 2-year interest rate swaps,

which rose to 2-month highs of 1.9950%. This has seen the US-Korea 2-year spread

edge lower to 106.4bps. 

- Fundamentally, the historical correlation between USDKRW and real yield

spreads suggests that the pair should be trading ~8% higher, meaning a major

change in US Fed or BOK monpol would be needed to prevent further medium term

upside.