■ Strong USD and weak sentiment vs. level burden, exporters’ USD selling; USD-KRW up slightly

The USD-KRW rate opened October 12 at KRW1,123.8, up KRW3.4 from the previous close. The USD received upward pressure and investor sentiment had weakened on declines in stock markets of major economies and oil prices. The USD-KRW rate rose further after the market opened on increased net selling of stocks by foreign investors. However, the upside was limited due to the burden of more than a KRW10 increase the previous day and exporters’ USD selling. In addition, investor sentiment improved as the KOSPI’s decline slowed and rebounded after the market opened. The USD-KRW rate closed the day at KRW1,123.6, up KRW3.2 from the previous close.

■ USD remains strong amid caution against a Fed rate hike; GBP-USD rises on easing concerns over hard Brexit

The September FOMC minutes showed the Fed’s commitment to raising the funds rate within this year. Some members argued that a further delay will increase the risk of a more rapid policy normalization going forward. The Fed funds futures indicated a 67.6% probability of a rate increase before the year’s end. The figure was unchanged from the previous day, but caution against a rate hike continued. The USD-JPY rate climbed to the low-JPY104 range on a strong USD. The EUR-USD rate fell to the low-USD1.10 level. British Prime Minister Theresa May accepted the need to have parliamentary scrutiny over the strategy for leaving the EU. The GBP-USD rate went up to the low-USD1.22 range amid easing concerns over a hard Brexit.

■ USD-KRW to fluctuate in mid-KRW1,120 range on positive investor sentiment despite USD appreciation

The USD-KRW rate is expected open at KRW1,126, slightly higher than the previous close, based on NDF exchange rates. The rate should receive upward pressure from continued USD appreciation amid Fed rate hike concerns. However, U.S. stocks pared losses after the release of the Fed’s September meeting minutes. The overnight KOSPI 200 futures closed up slightly despite the release of revised 3Q results by Samsung Electronics. Upward pressure from risk aversion is weak. The USD-KRW rate is likely to move in the mid-KRW1,120 range.

Source : Shinhan Investment Corp. / By  Keon-hyeong Ha Economist (keonhyeong.ha@shinhan.com)