USD/KRW: Reduced BoK's QE prospects to support the won – ANZ

Economists at ANZ Bank expect the Bank of Korea (BoK) to keep its policy rate unchanged and the small prospects of quantitative easing to support the South Korean won. What’s more, they forecast USD/KRW at 1,170 by end-2020 and at 1,135 by end-2021.

Key quotes

“The improving performance of various economic indicators suggests a revival is now in motion, with domestic demand leading the way. The recent uptick in infection cases has not derailed the recovery. While the outlook remains highly uncertain, South Korea’s economy is well positioned to capitalise on signs of an upturn in global demand.”

“We don’t expect the BoK to cut its policy rate again but maintain its current low of 0.5%. While the central bank may shed some more light on its unconventional policy tools framework at its upcoming meeting on 16 July, the recent improvement in activity has reduced the impetus for it to undertake a more active stance.”

“The reduced prospects of quantitative easing by the BoK will be supportive of the KRW, as should the likelihood of South Korea’s economy being among the leaders in the COVID-19 recovery. The domestic revival is already underway, and the export sector is well-positioned to catch up, thereby lifting the overall pace of recovery. We expect the KRW to be an outperformer in the region, and our forecast is for the USD/KRW to end this year at 1,170 and next year at 1,135.”