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2014.04.1706:21:00UTC+00Liquidity Dynamics Trump Real-Economy Dynamics in Driving Krw

Quotes from Standard Chartered:

-While Korea's export-inflation mix may influence BoK policy, the KRW's fortunes in the FX market tend to be dominated by financial-market swings rather than those in the real economy.

-Export volatility and KRW volatility tend to go hand in hand , but the current mix of subdued export growth and inflation is equally likely to be followed by modest KRW gains or losses.

-The link between USD-KRW and measures of USD liquidity conditions and financial-market stress, such as the USD-KRW 1Y basis swap, appears more robust. Ample USD liquidity may weigh on USD-KRW in the near term, but Fed policy rate hikes in 2015 may trigger periodic bouts of volatility in USD-KRW.

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