USD/KRW nears key resistance ahead of Bank of Korea decision

By:
on Apr 10, 2023
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  • The USD/KRW pair is nearing the key resistance of 1,327.50.
  • The Bank of Korea is expected to leave interest rates unchanged.
  • South Korea’s economy is facing major headwinds.

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The USD/KRW exchange rate was in a tight range on Monday as investors waited for the upcoming interest rate decision by the Bank of Korea. It was trading at 1,320, which is ~8.26% above the lowest point this year.

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South Korean won under pressure

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The South Korean won has been one of the worst-performing currencies in Asia this year as concerns about the economy remain. Recent data showed that the country’s economy is struggling. 

The situation could be worse after Samsung reported that its profits plunged by 96% in the first quarter of the year. Samsung is a major player in South Korea, where it represents about 20% of the country’s GDP.

Therefore, analysts believe that the Bank of Korea will leave interest rates unchanged at 3.50% for the third straight month. The last interest rate hike happened in November, when it increased by 25 basis points. Still, the swap market expects that the bank will deliver at least one more hike later this year.

As I wrote in this article, South Korea’s inflation has continued to drop in the past few months. The country’s key metrics have been struggling, as the property slump continues. Analysts believe that the housing market will collapse in the coming months as the situation worsens. Real estate is an important part of the South Korean economy, where it accounts for over 10% of the economy.

South Korean won faces more challenges ahead. For one, the currency has historically underperformed in April as foreign investor repatriate their dividends from the country. Data shows that the top ten companies in the country will pay over $3.53 billion in dividends. As such, these investors will likely convert the South Korean won to US dollars and other currencies.

USD/KRW technical analysis

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USD/KRW

USD/KRW chart by TradingView

The daily chart shows that the USD to KRW price has been in a strong bullish trend in the past few days. It is now approaching the key resistance level at 1,327.50, the highest point on February 28 and March 10. 

The pair has moved above the 50-period moving average while the Relative Strength Index (RSI) has moved above the neutral level. Therefore, more upside will be confirmed if the pair moves above the key resistance level at 1,350.

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