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KRW: Weaker Amid Equity Dip, Won In Line with US-SK Yield Differentials

KRW
EM BulletBulletSouth KoreaAPACEmerging Market News

Spot USD/KRW sits a little higher in latest dealings, the pair last near 1431.5, off around 0.10% in won terms. Lows have been at 1428.7. This leaves the pair comfortably within recent ranges though 

  • The BOK decision has come and gone without much impact on the won. BoK Governor Rhee noting that the market viewpoint for 2-3 cuts this year (including the one delivered today) is not that different from BoK assumptions.
  • The South Korea 1y1y forward rate is little change so far today, last near 2.55%, still up from recent lows around 2.43/2.44%. The chart below plots USD/KRW spot versus the US-SK 1y1y rate differential. The two series are moving in tandem together, with the recent softening in US yield helping bring USD/KRW lower. Current spot KRW levels don't look out of line with this 1y1y differential.
  • In the equity space, the Kospi is tracking lower, in line with softer regional trends. Earlier headlines around potentially further curbs on exports of chips to China from the US, is a likely tech equity headwind (although Nasdaq futures are little changed at this stage). 

Fig 1: USD/KRW Spot Versus US-SK 1y1y Differential 

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Spot USD/KRW sits a little higher in latest dealings, the pair last near 1431.5, off around 0.10% in won terms. Lows have been at 1428.7. This leaves the pair comfortably within recent ranges though 

  • The BOK decision has come and gone without much impact on the won. BoK Governor Rhee noting that the market viewpoint for 2-3 cuts this year (including the one delivered today) is not that different from BoK assumptions.
  • The South Korea 1y1y forward rate is little change so far today, last near 2.55%, still up from recent lows around 2.43/2.44%. The chart below plots USD/KRW spot versus the US-SK 1y1y rate differential. The two series are moving in tandem together, with the recent softening in US yield helping bring USD/KRW lower. Current spot KRW levels don't look out of line with this 1y1y differential.
  • In the equity space, the Kospi is tracking lower, in line with softer regional trends. Earlier headlines around potentially further curbs on exports of chips to China from the US, is a likely tech equity headwind (although Nasdaq futures are little changed at this stage). 

Fig 1: USD/KRW Spot Versus US-SK 1y1y Differential 

Keep reading...Show less