- USD/KRW extends rebound for the third straight day.
- South Korea’s inflation slows to 6-month low.
- US-China trade woes, dollar strength drive the spot higher.
The South Korean won remains on the offered vs. the greenback for the third straight day, as USD/KRW consolidates near five-day highs of 1,229.93 reached in early Asia.
The cross is on the road to recovery from seven-week lows, further helped by fresh won selling after South Korea’s consumer inflation slowed to a six-month low in April, as the coronavirus pandemic hit domestic demand and suppressed prices. The CPI rose 0.1% YoY in April vs. +1.0% seen previously.
Further, a deeper contraction in the South’s manufacturing sector activity, with the Manufacturing PMI falling further to 41.6 in April, also adds to the weakness in the domestic currency.
The Asian currency also tracks the weakness in the Chinese yuan, as the latter slump on renewed US-China trade tensions. US President Donald Trump threatened tariffs on China, in light of Beijing’s handling of the virus outbreak.
Amid broad risk-aversion, the haven demand for the US dollar has also picked up pace and boosted the uptick in the spot. The US dollar index rises 0.21% to 99.29 after last Friday’s plunge to 98.68.
Looking ahead, the dollar dynamics and US-China trade-related headlines will continue to dominate amid light trading and ahead of the key US macro news. At the press time, USD//KRW trades at 1,227.75, up 0.25% so far.
South Korean won: Technical levels to watch
From a technical perspective, the path of least resistance appears to the upside, as the spot is holding above all the major daily moving averages (DMA). Therefore, a test of 1,240 levels cannot be ruled in the coming week. To the downside, the 1224.50/80 levels offer immediate support (10-DMA/ pivot point).
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