USD/KRW to move firmly in March, but unlikely to rise sharply – Mizuho

The question now is whether the USD/KRW pair can become entrenched at the 1,200 level, according to economists at Mizuho Bank. There will be two main factors to watch this month. Federal Reserve and Bank of Korea monetary policy and geopolitical risk related to Russia and Ukraine. 

South Korean authorities to buy the won when the pair rises above 1,200

“With prices rising, though, the Fed is unlikely to shift its medium-term stance. In South Korea, meanwhile, the current BoK governor’s term ends this month and a presidential election is also looming, so with the BOK examining the timing of the next rate hike, the USD/KRW pair will continue to be supported by dollar buying on expectations for rising US interest rates.” 

“The pair will be bought on geopolitical risk related to Russia and Ukraine, so USD/KRW will continue to be supported on the downside by strong concerns about the tense Ukraine situation. However, if excessive risk aversion drags on and stocks markets continue falling, this will impact rate hike policies and US interest rates will face downward pressure, with the pair’s topside capped as a result.”

“USD/KRW is unlikely to rise sharply this month, with the South Korean authorities also likely to buy the won when the pair rises substantially above 1,200. However, the pair will probably move firmly as the trend from the end of February continues into March.”