USDKRW remains on the front foot with....>

KOREAN WON: USDKRW remains on the front foot with the knee-jerk weakness

following comments by trade advisor Peter Navarro that the US is not planning on

imposing investment restrictions on China. The pair is edging to the top end of

its short-term range, with 1,118 acting as resistance. 

- The failure of easing trade tensions to meaningfully impact the won suggests

that the currency's weakness over recent weeks has more to do with diverging

monetary policy between Korea and the US than it does with the fear of a trade

war. The spread of 1-year swaps has risen further in the US's favour in recent

trading, testing a new multi-year high at around 76bps. 

- While diverging inflation outlooks explain some of the divergence in rate

expectations, real yield spreads have also moved dramatically in the USD's

favour since the start of the year and continue to point to USDKRW upside. 

- The next level of technical support comes in at 1,150, marking the September

2017 peak.