FxWirePro: bullish, bearish scenarios, key driving forces and hedging vehicles of KRW
Source: FxWire Pro - Economic Indicators / 18 May 2017 09:20:20 Eastern Standard Time
Bearish KRW risk scenarios:
1) China growth slows more sharply than expected
2) No fiscal stimulus is delivered
3) External demand slows
Bullish KRW risk scenarios:
1) China slowdown is shallow
2) US CapEx cycle accelerates
3) Domestic fiscal stimulus is stronger than expected
Overall, our bias remains to fade weakness in KRW, as valuations remain attractive and given the potential for a new global trade and currency architecture.
KRW sentiment continues buffeted by a number of cross currents. Data momentum remains broadly positive. However, the market will clearly be watching developments in China and potential spillover effects from weaker growth momentum. At the same time, we have seen a strong rebound in US interest rates. A more hawkish Fed backdrop has the potential to boost USD sentiment against EM currencies.
Hence, we still like to uphold longs in USDKRW 3m NDFs, so, go long USDKRW 1m NDF at 1131 with a target at 1160 and a stop at 1108. The time horizon is 1-3 months and positive carry is approximately 2bp/month.© FxWire Pro 2018. All rights reserved. The FxWire Pro content received through this service is the intellectual property of FxWire Pro or its third party suppliers. Republication or redistribution of content provided by FxWire Pro is expressly prohibited without the prior written consent of FxWire Pro, except for personal and non-commercial use. Neither FxWire Pro nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon.