USD/KRW: More upside but expect some fluctuation – ANZ
|The South Korean won has emerged as one of the top performers in Asia in September, with a 1.2% gain against the USD. Bond inflows are supportive and equity selling is easing, but economists at ANZ Bank expect the market to be volatile around the US election time. All in all, USD/KRW is set to end the year around 1,170.
Key quotes
“Fundamentally, we remain constructive in KRW. The Korean economy is on a gradual recovery. The slump in PMI and exports is easing, the trade surplus is rebounding and inflation is off the low. Exports rose 3.6% YoY in the first 20 days of September, the first positive print in six months.”
“On portfolio flows, with a decent premium of 70-80bps over UST at the long end of the curve, KRW bonds have seen steady foreign demand. Equity flows are still negative (−USD0.9 B month-to-date) but offshore selling pressure has eased from the levels in the first two weeks of the month, helped by falling case numbers in the second wave of COVID-19.”
“The risk is increased market volatility, as we approach the US presidential elections on 3 November. Near-term volatility aside, we continue to see USD/KRW ending 2020 at 1,170, with further downside in 2021.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.