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South Korean won holds gains as USD/KRW slips on intervention talk
USD/KRW eased 0.1% to 1,430, with KRW support linked to reported coordinated intervention and exporter forward USD selling in June.
Commerzbank economists say the South Korean won has extended its strength versus the US dollar, with USD/KRW slipping 0.1% to 1,430. The move continued recent losses after a 0.5% drop on Monday and a 1.3% decline last week, according to FXStreet.
The bank attributes the KRW appreciation to reports that South Korea's Ministry of Economy and Finance intervened in the FX market last Thursday in coordination with Japan. Commerzbank also pointed to sustained exporter dollar selling, including sizeable forward sales in June.
Inflation developments are also part of the picture, with July CPI coming in at 2.8% year over year, below the Bloomberg consensus of 3.0%, and marking the slowest pace in three months. Core CPI edged up to 2.6%, and Commerzbank expects inflation to pick up sharply in August before easing gradually, though it likely remains above the Bank of Korea's 2% target.
On policy, Commerzbank expects the Bank of Korea to deliver one more 25 basis point rate hike this year, taking the base rate to 3.0%. It also cited the July MPC minutes as reinforcing a tightening bias, while noting domestic demand and the broader semiconductor-driven recovery could keep inflation more persistent.
In FX flows, Commerzbank highlighted domestic corporate net selling of USD 9.3 billion in forwards during June as an additional support for KRW strength.