South Korean Won: Recovery Bias on Pullbacks – OCBC

The Bank of Korea kept rates at 3%. OCBC strategists Christopher Wong and Sim Moh Siong view the decision, alongside the retained tightening bias and assessment that the South Korean Won (KRW) is undervalued, as supportive. They note that renewed broad risk aversion reversed some of KRW’s initial gains. Further recovery remains their expectation, but they favour buying on dips given unsettled global technology sentiment and oil prices, which remain key risks.

BOK support faces risk-sentiment test

"KRW initially strengthened but subsequently pared gains overnight amid broader risk aversion. The BoK’s policy guidance had provided some support."

"While the decision to hold rates at 3% was widely expected, the central bank retained its tightening bias amid resilient growth and still-elevated inflation."

"Governor Shin’s assessment that KRW remains undervalued also offered some reassurance. The currency’s earlier resilience despite the equity selloff was also notable, although the overnight retracement suggests that global risk sentiment remains an important driver."

"We see room for further KRW recovery, supported by the BoK’s tightening bias and Korea’s strong export performance. However, we would be cautious about extrapolating recent gains while global technology sentiment remains unsettled."

"A continued recovery would be more convincing if foreign equity selling moderates. For now, we favour buying KRW on dips rather than chasing strength, with oil prices and global technology sentiment remaining key risks."

"Daily momentum is not indicating a clear bias while decline in RSI moderated. 2-way trades likely. Support at 1320. Resistance at 1335, 1343 (21 DMA). Sell rallies preferred."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)