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14 May 2015
USD/KRW and BoK – buy the rumour, sell the fact? – Westpac
FXStreet (Barcelona) - With Bank of Korea set to deliver its policy rate decision tomorrow, Jonathan Cavenagh at Westpac suggests that short 1month USD/KRW remains a better risk/reward trade.
Key Quotes
“Rather than trying to sell the Korean won on a possible rate cut, the better risk/reward for us appears is to average into a short 1 month USD/ KRW ahead of tomorrow’s BoK decision.”
“Firstly a rate cut move is by no means a done deal and even if the BoK does cut, in this easing cycle we have tended to see USD/KRW fall in the two weeks after a cut has been announced.”
“This appears to reflect continued inflow momentum into Korean assets, which is particularly evident in terms of bond inflows. Korea’s very strong current account position is also likely to be a supporting factor. Broader USD sentiment is also softer and we have seen a decent bounce in the JPY/KRW cross from the lows.”
Key Quotes
“Rather than trying to sell the Korean won on a possible rate cut, the better risk/reward for us appears is to average into a short 1 month USD/ KRW ahead of tomorrow’s BoK decision.”
“Firstly a rate cut move is by no means a done deal and even if the BoK does cut, in this easing cycle we have tended to see USD/KRW fall in the two weeks after a cut has been announced.”
“This appears to reflect continued inflow momentum into Korean assets, which is particularly evident in terms of bond inflows. Korea’s very strong current account position is also likely to be a supporting factor. Broader USD sentiment is also softer and we have seen a decent bounce in the JPY/KRW cross from the lows.”