USD/KRW rallies towards 1,300 as South Korea lowers GDP growth forecasts

• USD/KRW takes the bids to snap two-day downtrend, extends bounce off weekly low.
• South Korean FinMin announces worrisome GDP, inflation forecasts.
• US dollar rebound adds strength to the pair’s recovery moves amid a sluggish session.

USD/KRW justifies the South Korean government’s pessimistic economic forecasts as it jumps back to $1,287 while snapping a two-day downtrend, heading into Thursday’s European session.

Early Thursday morning in Asia, South Korea Finance Minister (FinMin) Choo Kyung-ho announced multiple measures to ward off the economic fears, as well as tame inflation woes. The official statement lowers the 2022 growth forecast to 2.6% from the previous projection of 3.1%. the inflation predictions were also increased to 4.7% from 2.2%.

The Asian nation also planned to extend USD/KRW trading hours, improve access for foreign dealers. Further, Reuters also said, “South Korea plans to cut maximum corporate tax rate to 22% from 25%.”

It’s worth noting that the chatters surrounding hopes of more market intervention also grew stronger on the South Korean FinMin’s comments. “We are putting our utmost priority in stabilizing prices as that's our shared understanding," finance minister Choo Kyung-ho said, referring to Bank of Korea (BOK) Governor Rhee Chang-Yong and other top policymakers, with whom he had met early on Thursday,” per Reuters.

On the other hand, the US Dollar Index (DXY) pares the Fed-inspired losses as the US Treasury yields fail to extend post-Fed downside under the previous day’s low of 3.28%. despite losing seven basis points (bps) on a day to 3.32% by the press time.

Technical analysis

Despite the latest rebound, the double tops surrounding $1,295-96, as well as the $1,300 threshold, challenge the USD/KRW buyers. On the contrary, a weekly support line of around $1,272 restricts the short-term downside.