KRW likely to remain susceptible to external uncertainty, geopolitical situation in the Peninsula, says Scotiabank

The KRW has traded in a range since early May despite surging Kospi share index, partly attributed to Korea’s rising foreign reserves. The 1,110 mark will remain a critical support for USD/KRW at the current stage. In the medium-term, the combination of fiscal and monetary policies will be supportive of the KRW. The stance of the Bank of Korea’s (BoK) monetary policy could turn more hawkish along with the government’s expansionary fiscal policy in the months ahead.

Central Bank Governor Lee Ju-yeol after holding a luncheon meeting with new Finance Minister Kim Dong-yeon on Tuesday said that the central bank "will maintain the accommodative monetary policy to help out with economic recovery" and "cannot ignore the ongoing economic trends," according to Yonhap News.

Governor Lee’s comments alleviated market concern as he hinted at a tightening of monetary policy Monday. The nation’s benign inflation outlook will likely allow the central bank to stay on hold for the remainder of the year.

"We maintain our long JPY/KRW cross position with a target of 10.5 for now as the KRW remains susceptible to external uncertainty and the geopolitical situation on the Peninsula," Scotiabank commented in its latest research report.