South Korean Won: Appreciation may slow against US Dollar – OCBC

OCBC Bank strategists Sim Moh Siong and Christopher Wong observe that USD/KRW has consolidated after sharp declines over the past eight sessions, with exporter and month-end US Dollar (USD) selling offset by a firmer USD tone and foreign equity outflows. They suggest South Korean Won (KRW) support remains intact but the pace of appreciation may moderate, as focus turns to the Bank of Korea (BoK) meeting, US data, Jackson Hole and month-end flows.

KRW strength likely to consolidate

"USD/KRW consolidated overnight after trading sharply lower for most of the past 8 sessions."

"Exporter and month-end USD selling continued to provide support, but this was offset by a modestly firmer USD tone and sizeable foreign equity outflows (week-to-date -USD5.1bn). "

"The price action suggests that while the broader KRW support remains intact, the pace of the recent move may be showing tentative signs of moderation."

"Focus now turns to Thursday’s BoK meeting. Stronger growth and still-firm core inflation keep the case for further tightening alive, but the recent KRW appreciation and tighter financial conditions may also give policymakers some room to pause after July’s hike."

"Beyond the BoK, a busy US data calendar, Jackson Hole and month-end flows could also make for more two-way trading into the end of the week."

"USD/KRW last at 1384 levels. Daily momentum is flat while RSI is near oversold conditions. Some consolidation likely for now. Support at 1375, 1365 levels. Resistance at 1390, 1397 levels"

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