[ANALYST REPORT] USD-KRW up on strong USD and poor sentiment

■ USD-KRW climbs by a double-digit rate as investor sentiment weakens on Samsung smartphone issue

The USD-KRW rate opened Tuesday at KRW1,108.5, up KRW0.1 from the previous close. Samsung Electronics shares fell further due to the Galaxy Note 7 issue, pulling down the KOSPI. Amid weak risk appetite, the rate went up to KRW1,121.6 at one point during trading hours as foreigners sold domestic stocks for two consecutive trading days. The upside was limited with exporters’ USD selling. The USD-KRW rate closed the day at KRW1,120.4, up KRW12.0 from the previous close.

■USD gains on caution over Fed rate hike; EUR and GBP turn bearish amid hard Brexit concerns

Concerns over a Fed rate hike this year persisted one day before the release of the September FOMC meeting minutes. Chicago Fed President Charles Evans, who has so far argued for a rate increase, said that it is a good idea to raise the rate in December given the positive jobs report for September. The EUR-USD rate dipped to the low-USD1.10 level and the GBP-USD rate to the low-USD1.21 level, reflecting upward pressure on the USD and concerns over a hard Brexit. The USD-JPY rate moved in the mid-JPY103 range as upward pressure on the USD was partially offset by weakening investor sentiment amid a decline in stocks of developed countries like the U.S. and Europe and drop in oil prices.

■USD-KRW to rise further and fluctuate in high-KRW1,120 range given strong USD and poor investor sentiment

The USD-KRW rate is expected to open today at KRW1,125, up from the previous close based on NDF exchange rates. The USD advanced against the EUR and JPY amid caution over the Fed’s rate hike. The USD-KRW rate received further upward pressure due to falling oil prices, stock market declines in Europe and the U.S., and poor investor sentiment due to the Samsung Galaxy Note 7 issue. However, the USD-KRW rate is expected to move in the high-KRW1,120 range given the possibility of exporters’ USD selling after yesterday’s sharp increase.

*Source : Shinhan Investment Corp. (research@shinhan.com)