KRW: BoK FX intervention odds low in the midst of US-South Korea trade talks - ING

The won sold-off sharply after it was reported that the Korean government are looking to intervene against one-sided FX moves, points out Viraj Patel, Research Analyst at ING.

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“While this highlights the well-known aversion of policymakers to currency strength, we think neither verbal nor active leaning against the wind intervention will prove effective in stopping the trend of KRW appreciation. In addition to ongoing portfolio inflows amid a backdrop of low inflation, gently rising BoK policy rates and reduced geopolitical risks – we note that the probability of any immediate large-scale intervention to offset KRW strength is very low, especially as officials begin to renegotiate the 2012 US-South Korea free trade deal (KORUS). This factor, in particular, means that USD/KRW should resume its downward trend following today's positioning adjustment and we continue to eye an extensive KRW rally to the 1000 level.”