Won Continues Move Higher As Data Shows C/A Surplus Increase

The Korean won continues its move higher, USD/KRW last down around 0.7% from the end of the US session at 1089.90. The pair flirted with the psychological 1100 level for a few days before making a concerted push downwards and has continued that trend.

• Data from South Korea earlier showed the current account surplus rose to its highest level in over three-years has helped support the local currency. Stronger capital inflows into the region as well as a firm growth outlook led by China have also provided support.
• The market largely shrugged off the news that the South Korean National Assembly passed the 2021 budget with minor amendments, keeping its expansionary stance. The 2021 budget includes fiscal spending that is around KRW 2.2tn more than in the proposed budget. However, despite expansionary policy total fiscal spending is similar levels in 2020.
• Data released earlier this week showed foreign reserves rose again to $436.38bn, an approximately $10bn build compared to a $6bn build in October. The increase suggest the Bank of Korea have stepped up efforts to stem the slide in USD/KRW, but recent price action shows they haven't had much success.
• The main narrative in currency markets remains the weaker dollar as markets assess the prospect of further US fiscal stimulus. Earlier this week, a bipartisan group of senators and representatives proposed a $908bn compromise to encourage Democrat and Republican leaders to allow a vote on fiscal stimulus that could receive support from both parties, the deal must be given authorisation prior to the 11 December deadline to avoid a government shutdown.