The South Korean won was Asia’s worst performer over the past six months, and technical indicators suggest the misery is not yet over.
The won dropped to a 17-month low last week, breaching a key support level. Other indicators, including the moving average convergence-divergence, suggest that the tech-dependent currency could slip further against the US dollar.
The Bank of Korea (BOK) could give traders more reason to sell the won on Friday if it disappoints the likes of Goldman Sachs Group Inc and Citigroup Inc, who are calling for a third rate increase sooner than later.
Photo: EPA-EFE
With the Federal Reserve turning increasingly hawkish, a hike might still not be enough to stem the currency’s decline if the BOK signals a slowdown in policy normalization.
“It appears that won is being impacted by higher US yields as well as foreign equity outflows,” TD Securities head Asia and Europe emerging markets strategist Mitul Kotecha said in Singapore. “Pressure on tech stocks globally is also likely weighing on the currency. An absence of support from local exporters is keeping the door open to won downside.”
A global selloff at the start of the year is weighing on South Korea’s tech-dependent market, which suffered a net outflow of US$21 billion last year.
US Department of the Treasury 10-year yields have surged to their highest since April last year, denting sentiment for emerging-market assets. The US-dollar-won pair rose beyond 1,200.35 last week, its high of last year, to touch 1,203.90.
BOK Governor Lee Ju-yeol has previously played down the need to match the pace of the Fed’s rate hikes, doubling down that domestic factors are more important considerations.
Any dovish rhetoric on Friday might help spur further won weakness, especially if investors react by paring back the 90 basis points of hikes they have priced in for the year.
A majority of economists expect the BOK to raise rates to 1.25 percent in the first quarter, although their views are split on whether the move would come on Friday or at the meeting next month.
The currency might find some respite near the end of the month. Local exporters who have accumulated a sizable amount of dollars might start selling ahead of the Lunar New Year, when companies exchange the greenback into the won to give employees, Woori Bank economist Min Gyeong-won said in Seoul.
In Italy’s storied gold-making hubs, jewelers are reworking their designs to trim gold content as they race to blunt the effect of record prices and appeal to shoppers watching their budgets. Gold prices hit a record high on Thursday, surging near US$5,600 an ounce, more than double a year ago as geopolitical concerns and jitters over trade pushed investors toward the safe-haven asset. The rally is putting undue pressure on small artisans as they face mounting demands from customers, including international brands, to produce cheaper items, from signature pieces to wedding rings, according to interviews with four independent jewelers in Italy’s main
Macronix International Co (旺宏), the world’s biggest NOR flash memory supplier, yesterday said it would spend NT$22 billion (US$699.1 million) on capacity expansion this year to increase its production of mid-to-low-density memory chips as the world’s major memorychip suppliers are phasing out the market. The company said its planned capital expenditures are about 11 times higher than the NT$1.8 billion it spent on new facilities and equipment last year. A majority of this year’s outlay would be allocated to step up capacity of multi-level cell (MLC) NAND flash memory chips, which are used in embedded multimedia cards (eMMC), a managed
Japanese Prime Minister Sanae Takaichi has talked up the benefits of a weaker yen in a campaign speech, adopting a tone at odds with her finance ministry, which has refused to rule out any options to counter excessive foreign exchange volatility. Takaichi later softened her stance, saying she did not have a preference for the yen’s direction. “People say the weak yen is bad right now, but for export industries, it’s a major opportunity,” Takaichi said on Saturday at a rally for Liberal Democratic Party candidate Daishiro Yamagiwa in Kanagawa Prefecture ahead of a snap election on Sunday. “Whether it’s selling food or
In the wake of strong global demand for AI applications, Taiwan’s export-oriented economy accelerated with the composite index of economic indicators flashing the first “red” light in December for one year, indicating the economy is in booming mode, the National Development Council (NDC) said yesterday. Moreover, the index of leading indicators, which gauges the potential state of the economy over the next six months, also moved higher in December amid growing optimism over the outlook, the NDC said. In December, the index of economic indicators rose one point from a month earlier to 38, at the lower end of the “red” light.
RSS