USD/KRW likely to stay firm amid continued dividend payout BoK’s potential dovish stance, says Scotiabank

The USD/KRW currency pair is expected to stay firm and rally through 1,140 the rest of this week amid continued dividend payout and a potential dovish stance of the Bank of Korea (BoK), according to the latest research report from Scotiabank.

The BoK is likely to leave its policy unchanged at 1.75 percent on Thursday morning, although its elevated real policy rate remains a drag on growth together with gloomy export outlook. The central bank is likely to lower its growth and inflation forecasts in its quarterly outlook review due Thursday, the report added.

Alternatively, South Korea will boost government spending through an extra budget to spur economic growth, which has been welcomed by the IMF. Finance minister Hong Nam-ki said last week the ministry will submit a supplementary budget of smaller than KRW 7tn to parliament by the end of April.

Geopolitical situation will likely improve on the Peninsula as South Korean President Moon Jae-in said on Monday that he would push for another summit with North Korean leader Kim Jong Un with the aim of saving Trump-Kim nuclear talks.

In addition, Kim said on Friday that he is willing to hold a third summit with US President Donald Trump as long as the US offers acceptable terms for an agreement by the end of the year. Trump wrote in a tweet on Saturday that "a third Summit would be good in that we fully understand where we each stand."

"Our expectations of a steady policy rate is largely due to the Fed’s promise to be patient before adjusting interest rates again and the BoK’s determination to secure the nation’s financial stability," Scotiabank further commented.