Halister News

(Bloomberg) -- USD/KRW may extend recent decline to test support at 16-month low of 1,064.97 in medium term if BOK doesn’t indicate willingness to slow pace of won’s rise at its meeting tomorrow, Bloomberg strategist David Finnerty writes.

• Won has been appreciating since U.S. payroll data on Sept. 2, which lowered market probability of Fed hike in Sept. and spurred foreign investors to purchase Korean bonds and equities as risk-on sentiment grew
• Any more disappointing U.S. data could bolster investor expectations that Fed won’t hike this year, encouraging overseas funds to invest more in Korea
• Won strength isn’t positive for the country’s exports
• Slow stochastics remain bearish with %D reading of 30 and falling
• BOK is expected to leave 7-day repo rate at 1.25% according to 31 of 32 economists in Bloomberg survey; one predicts 25- bp cut
  • Household debt continues to rise, discouraging central bank from cutting rates; improving Sept. business survey data for manufacturing and non-manufacturing further suggest BOK will remain on hold
• USD/KRW up 0.2% at 1,093.95; low of 1,064.97 hit April 29, 2015
• NOTE: David Finnerty is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.