USD/KRW to show resilience around the 1120 level – Mizuho
|The USD/KRW pair has traded with a lack of direction recently, but there will be three factors to consider this month. Dividend flows from South Korean companies to overseas investors (won-selling demand), dollar buying on rising US interest rates and trading in South Korean stock markets by overseas investors, as reported by Mizuho Bank.
The USD/KRW pair is expected to move somewhat firmly in April
“Companies who release their business results in December will be releasing dividends in March and April. This will lead to dollar-buying demand among overseas investors. In regular years, the current account balance shrinks during this time, which is another reason why the currency pair will probably rise.
“Yields on US long-term bonds have essentially recovered to pre-pandemic levels, so there will be limits to how much dollar-buying pressure emerges from here on.”
“Rising US interest rates have cooled off, with selling in South Korean stock markets by overseas investors also calming down, so the impact on the currency pair will probably be muted.”
“The pair’s downside is expected to move firmly at 1120. However, if the distribution of vaccines takes far longer than currently planned or if the vaccines are not as effective as expected, the greenback might be sold again as US interest rates fall once more, so caution will be needed.”
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