KRW likely to advance further amid resumed equity inflows, says Scotiabank

The KRW will likely advance further amid resumed equity inflows while remaining susceptible to positioning, external liquidity conditions and hovering geopolitical uncertainty. The currency pair is expected to trade towards 1,110 and then 1,100 after breaking below 1,120 on Tuesday.

The KOSPI share index has been consolidating around the 2,300 level despite equity outflows recorded on Friday and Monday. However, foreign investors turned net buyers of local shares on Tuesday as external liquidity remains ample at current stage as suggested by steadily increasing balance sheets of the Bank of Japan (BoJ) and the European Central Bank (ECB).

"On the other hand, we need pay attention to the positioning. Year-to-date, foreign funds have poured USD 6.89 billion of funds into Korea’s equity markets. We also stay cautious on developments in global liquidity conditions as the KRW could decline versus the USD if investors start to worry about external liquidity shrinking," Scotiabank commented in its latest research report.