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A bad year for the South Korean won may be about to get worse


SOUTH Korea's won has been the worst-performing Asian currency this year. Data this week may add to its woes.

Industrial production and consumer confidence numbers will be in focus as traders seek to gauge whether the recent weakness in exports and inflation is spreading.

Signs of slower growth may fuel bets that the Bank of Korea will follow the Federal Reserve in turning more dovish, quickening the won's decline.

"The data has run a lot weaker than I had bargained on," said Rob Carnell, Asia-Pacific head of research and chief economist at ING Bank NV in Singapore. ''If anything, the Federal Reserve's decision makes it more likely the Bank of Korea cuts."

Most emerging Asian currencies have strengthened this year as US-China trade tensions have eased and the Fed has stopped raising interest rates. The won has been the odd one out, falling 1.3 per cent.

Industrial production slowed to a four-month low of 0.1 per cent in January, and if February's data due on Friday confirm that trend, the won's losses may escalate. Consumer confidence numbers for March are due on Wednesday, and a manufacturing sentiment survey on Thursday.

Traders have been building bets that the Bank of Korea is poised to cut interest rates for the first time in three years, even though governor Lee Ju-yeol has sought to damp that speculation. Three-year bond yields are approaching the central bank's benchmark of 1.75 per cent, while the market implied policy rate for one year's time has dropped to 1.64 per cent from as high as 2.10 per cent in May.

If this week's data reinforce the slowing trend, the dollar-won currency pair may rise above the range of 1,104.95 to 1,144.75 it's been stuck in since the end of June. Technicals suggest that if it breaches the upper end of that band, it may test the July 2017 high of 1,157.90. The pair closed on Friday at 1,130.20. BLOOMBERG

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