KRW remains susceptible to external uncertainty, geopolitical situation in the Peninsula: Scotiabank

The KRW has traded in a range recently despite continued portfolio inflows, lagging the surging Kospi share index. It is likely due to swinging market sentiments. European Central Bank (ECB) President Mario Draghi said Monday that the eurozone still needs "an extraordinary amount of monetary support," suggesting external liquidity conditions will remain accommodative in the coming months.

However, Reuters reported Tuesday that "ECB policymakers are set to take a more benign view of the economy when they meet on 8 June and will even discuss dropping some of their pledges to ramp up stimulus if needed," citing four sources with direct knowledge of the discussions. Reuters citing the KCNA reported Tuesday that North Korea has warned of a "bigger gift package" for the US after firing a ballistic missile on Monday morning.

On Tuesday, South Korean President Moon Jae-in ordered a special probe into the undisclosed entry of four THAAD rocket launchers, according to Yonhap News. The US Defense Department replied it has been "very transparent" in the deployment of the THAAD missile defence system.

"We would like to buy JPY/KRW cross with a target of 10.5 as the KRW remains susceptible to external uncertainty and the geopolitical situation on the Peninsula," Scotiabank commented in its latest research report.