South Korean Won: High-beta KRW needs foreign inflows – OCBC

OCBC’s Christopher Wong comments that USD/KRW eased as Korean equities rebounded and foreign investors briefly turned net buyers, but warns this may not mark a lasting shift. Wong stresses that KRW remains a high-beta currency sensitive to US yields, Oil and tech sentiment, with further recovery hinging on sustained foreign equity inflows and softer US rates.

Won rebound fragile as flows stay key

"USD/KRW eased slightly from its Fri’s highs into NY close. During the Asian session, Korean equities rebounded and foreign investors returned as buyers. KOSPI rose 2.66%, led by semiconductor names, while foreigners net purchased around KRW439bn of equities. The pullback in oil and some easing in UST yields also helped the broader risk backdrop."

"But we would not read one session as a turn in the flow story just yet. Foreign equity selling had been a key drag on KRW over the preceding week, particularly through the large-cap technology complex. Friday’s rebound is helpful, but a more sustained recovery in KRW likely needs foreign selling to slow or reverse."

"The underlying semiconductor/export story remains supportive, but KRW continues to trade as a relatively high-beta currency. That leaves it sensitive to US yields, oil and swings in tech sentiment. Softer US rates together with a more durable return of foreign equity inflows would open room for further KRW recovery while renewed foreign selling and elevated rates/oil would likely keep USD/KRW supported."

"USD/KRW last closed at 1386 levels. Daily momentum remains bullish while RSI rose closer to overbought conditions. Risks remain skewed to the upside. Resistance at 1388 levels (23.6% fibo retracement of Jul high to Sep low), 1410 (50 DMA)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)