Analysts at MUFG Bank, forecast the USD/KRW will trade at 1210 during the first quarter, at 1200 in the second quarter and at 1165 in the fourth. With the outbreak of the coronavirus, they now expect the Bank of Korea (BOK) to cut twice in 2020 as it did last year, once in 1Q and once in 2Q.
“Turned out we were right to be sceptical about blue-sky EM in January even though, of course, we hadn’t predicted the Wuhan coronavirus. You might say we were right for the wrong reason but we made a judgment, nonetheless, that things in EM were not as positive as thought. We are still wary of another shoe dropping. Going forward, the new coronavirus should dominate February (and quite likely 1H20). We think it takes time before the deleterious growth effects of a new disease is fully understood and priced (allowing for a natural human inclination to discount unpleasant news).
“We have made the assumption this global epidemic will be bigger than SARS for China, shaving 1-2ppt off of actual 2020 growth. With some luck we can keep it to the lower bound of the range. But Asian satellite countries around China – especially those in East Asia – will feel the effect, meaning the risk of shaving -0.5ppt off of 2020 Korean growth, which changes Korea in prospect from a 2% economy into, despite 5G and semiconductors turning the corner, a 1½% state, The Moon Administration and BOK won’t accept that, so we now expect a BOK cut in 1Q20 and quite possibly another in 2Q20.”
“FX being a forward-looking Market, we think the most extreme reactions will come sooner than later. We also expect KRW to react more than TWD, keeping TWD/KRW with a 39-handle as we discussed earlier.”
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.