USD/KRW likely to trade between 1,060-1,085 with upward bias given rising geopolitical uncertainties, says Scotiabank

The USD/KRW currency pair is expected to range trade between 1,060 and 1,085 with an upward bias given rising geopolitical uncertainty. Also, the South Korean exporters’ dollar selloff will provide some support to the KRW when approaching the month end, according to the latest research report from Scotiabank.

Bank of Korea (BoK) Governor Lee Ju-yeol told reporters yesterday that the central bank will continue stabilizing the markets if needed as the FX intervention policy remains unchanged. The central bank’s monetary policy committee on Thursday morning voted unanimously to maintain its policy rate at 1.50 percent, pledging to closely monitor the impact of oil prices and household debt growth.

South Korea’s CPI inflation is likely to remain steady in the months ahead and cool moderately in the period of August to October due to the base effect, although the central bank sees the headline print rising gradually starting from the second half, the report added.

On the FX side, resumed US-Eurozone growth and inflation divergence will continue bolstering the DXY Index in the run-up to the June FOMC meeting, with Italy’s political uncertainty imposing additional downward pressure on the single currency.

Further, ECB policymakers concluded that the Eurozone economic growth could slow further with uncertainty on the rise but the bloc’s expansion remains solid and broad-based, according to the minutes of the April 26 meeting released on Thursday.

"Given the BoK’s slightly negative real policy rate, a June Fed rate hike will see the South Korean central bank raising its policy rate by 25 bps in Q3," comments from the report added.

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