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Analysts at MUFG Bank consider the South Korean won might decline modestly against the US dollar during the second quarter and recover later. They see USD/KRW ending the year around 1200.00 and at 1175 over the first quarter of the next year.

Key Quotes:

“The final four trading sessions of April saw USD/KRW down from its March London close of 1218.4 to 1203.09. BOK stood pat on rates but otherwise it announced QE of govvies, restarted purchases of KDB, Exim and IBK bonds and may cut in May.”

“Global drivers remain dominant in KRW as April ended with strong hopes on the potential of Remdesivir as a COVID-19 game-changer. A balanced read of the evidence thus far suggest the Ebola drug may lop off the worst feared of global death tolls (though we wonder how distribution would fare in poorer countries with weak public health infrastructure) yet not be the game-changer some (like US President Trump) hope for.”

“One thing on which we are far more certain are ghastly economic soundings for Korea and most other OECD nations in the world. There is potential that hoping for the best may allow Markets (including currencies) to ignore all of the bad economic news coming, but that would seem to require a constant stream of improving medical news in weeks to come. Korea’s five automakers are planning to reduce working days in half in May while April auto exports may shrink by more than 40%.”

“We are less concerned re the health of North Korean leader Kim Jong-Un. Even should succession be required, we think a subsequent collective leadership has as its best interest to maintain the status quo rather than be unnecessarily provocative (it’s the same reason we don’t foresee a direct China play on Taiwan at the moment).”