Won Posts Strongest Rolling Monthly Return Since 2017
The firm market bias remains to fade upticks in USD/KRW. The 1 month NDF is already back down to 1361/62, which is -0.70% on NY closing levels. This puts us back below the 100-day EMA (1366.66), while note the overnight low was just under 1355. Onshore spot levels are down slightly from yesterday's close, despite a firmer USD impetus overnight.
- The Kospi is clawing back earlier losses, with the early dip towards 2400 supported, last around 2424, flat for the session.
- The chart below overlays the rolling monthly returns of KRW/USD against rolling offshore net equity flows. The recovery in the won in the past month has been the strongest since early 2017. Even with this recent recovery, the won still remains nearly 13% down for the year. Net equity inflow momentum for the past month is back to late 2021 highs.
- As the chart suggests, such strongly momentum for the won doesn't continue indefinitely, likewise for the flow backdrop. Hence some slowing in the rate of gains may not be a surprise.
- In the near term though, a lot is likely to depend on how tonight's US CPI outcome unfolds, with downside surprises likely to encourage USD bears that a broader peak is in place for the dollar.
Fig 1: KRW/USD Rolling Monthly Changes Against Net Equity Inflows
Source: MNI - Market News/Bloomberg