Asia FX Talking: North Asian currencies continue to perform well
At a Glance
The desk suggests that North Asian currencies, particularly the Korean won, are experiencing a significant rally, though a sustained move below the 1350 level in USD/KRW may be challenging. Per the full note from ing-think, the won has appreciated approximately 13% from its recent highs, indicating strong bullish momentum backed by local demand and positioning shifts. The report also highlights the stability in the Chinese renminbi due to exporter conversions, even against a backdrop of widening yield spreads. Without immediate high-impact events on the calendar, traders should prepare for potential volatility as positioning aligns ahead of market movements.
Key Takeaways
- 01The Korean won has appreciated approximately 13%, leading the North Asian currency rally.
- 02A sustained move below 1350 in USD/KRW may prove challenging this month.
- 03The Chinese renminbi remains stable due to strong exporter conversions despite widening yield spreads.
- 04No immediate high-impact events are expected to disrupt the momentum of these currencies.
Full Analysis
What the desk is arguing
The desk argues that North Asian currencies, especially the Korean won, are in a bullish phase, primarily driven by solid local demand and positioning. Per the full note, the USD/KRW pair has demonstrated remarkable strength, having fallen significantly from summer highs, though reaching and maintaining a position below 1350 may be difficult this month.
Supporting this outlook, the report notes a rally in USD/CNY, currently trading around 6.71, reflecting ongoing exporter conversions that have countered any bearish sentiment from widening US-China yield spreads. The expectation for the CNY remains a cautious appreciation, aligning with the observation of substantial trade surpluses contributing to its strength.
Where it sits in our coverage
Based on our assessments, we currently have a target for USD/KRW at 1350. Specific targets from various firms show the following: - ING: 1350.00 for Dec-26 - JPM: 1375.00 for Dec-26 - DB: 1300.00 for Dec-26.
This perspective aligns with our target being at the higher end of the spread, as ING is leaning toward a cautious approach, while JPM appears more bullish. Our expectations suggest the market is pricing in potential challenges for the Korean won to sustain its upward momentum, particularly as it approaches significant psychological levels.
How other firms see it
Aligned firms, including ING and JPM, are generally optimistic about the Korean won's resilience but foresee potential resistance at pivotal levels. In contrast, firms like BofA maintain a more bearish stance, predicting headwinds from changing yield dynamics that could pressure the Korean currency.
Traders should also keep an eye on other related pairs such as USD/CNY and USD/IDR, as shifts in these currencies can influence sentiment and positioning for the North Asian region, particularly amid evolving geopolitical and economic conditions in the region.
Market Implications
Traders should watch the 1350 level in USD/KRW closely, as failure to maintain this could signal a reversal. Positioning aligned with a potential exposure to rising CNY, especially ahead of any US-China yield discussions, could also lead to significant market movements.
From the original
Articles Asia FX Talking: North Asian currencies continue to perform well Published 10:59 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download It has been another strong month for the North Asian currencies, with the Korean won leading the pack. However
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