Risk of a pause in USD/KRW rally likely in short-term

Korean Won was least performing Asian currency since the beginning of November, shedding 3.9% versus US dollar. The domestic data over this period was disappointing.

IP growth slowed more than expected in October from 2.8% to 1.5% and the trend of dropping exports continued. The more timely Business Survey showed renewed drop in both manufacturers and non manufacturers confidence this month, despite under performance of KRW.

"And while CPI inflation is showing signs of picking up (November: 1.0% headline), it is still some way from reaching the BoK's (new) 2.0% target. The risk in the short-term is that positioning, proxied by equity flows, has turned very negative over this period", says RBC Capital Markets.

Historically, equity outflows to this extent have foreshadowed a period of consolidation at the very least.