Won Plays Catch Up

The won is stronger today, USD/KRW gapped lower on the open, playing catch up after South Korean markets were closed yesterday. The pair opened at 1117.90, but has since moved higher to 1121.45, down 1.95 on the session.

• Data yesterday showed industrial production rose 7.5% Y/Y in January, above estimates of 5.9%, the M/M figure fell 1.6%, compared to estimates of a 0.7% rise. Today Markit Manufacturing PMI rose to 55.3, from 53.2 in January. "February data provided a further signal that the South Korean manufacturing sector continued its sustained recovery following COVID-19 disruption last year. The latest Manufacturing PMI reading was the highest since April 2010 and indicated that operating conditions have improved solidly thus far in the first quarter of 2021. Both output and new orders expanded at the fastest pace in close to 11 years in the latest survey period as manufacturers reported increasing demand and new product development had boosted the overall health of the sector," said Usamah Bhatti, Economist at IHS Markit.
• It was announced last week that the MOF would issue an extra KRW 9.9tn of government bonds to fund the latest extra budget, in addition to the record KRW 176.4tn issuance already announced, however it is less than the KRW 12tn – KRW 20tn range that was floated, with the ruling democratic party pushing for the larger figure.
• The finance ministry will submit the budget proposal to lawmakers on March 4. If the plan is approved, it will increase South Korea's government's debt ratio to 48.2% of GDP, up from 47.3%.
• Following a spike in yields last week, the BoK has pledged to support the space, setting out plans to purchase up to KRW 7tn of government bonds from the market in the first half of this year, compared to KRW 11tn for the whole of 2020.
• Markets look ahead to GDP data on Thursday where the final Q4 print is expected to confirm a contraction of 1.4% Y/Y.