Bad year for S Korean won might get worse

Bloomberg

South Korea’s won has been the worst-performing Asian currency this year. Data this week may add to its woes.
Industrial production and consumer confidence numbers will be in focus as traders seek to gauge whether the recent weakness in exports and inflation is spreading. Signs of slower growth may fuel bets the Bank of Korea will follow the Federal Reserve in turning more dovish, quickening the won’s decline.
“The data has run a lot weaker than I had bargained on,” said Rob Carnell, Asia-Pacific head of research and chief economist at ING Bank NV in Singapore. ‘‘If anything, the Federal Reserve’s decision makes it more likely the Bank of Korea cuts.”
Most emerging Asian currencies have strengthened this year as US-China trade tensions have eased and the Fed has stopped raising interest rates. The won has been the odd one out, falling 1.3 percent.
Industrial production slowed to a four-month low of 0.1 percent in January, and if February’s data due on Friday confirm that trend, the won’s losses may escalate.
Consumer confidence numbers for March are due on Wednesday, and a manufacturing sentiment survey.
Traders have been building bets the Bank of Korea is poised to cut interest rates for the first time in three years, even though Governor Lee
Ju-yeol has sought to damp that speculation. Three-year bond yields are approaching the central bank’s benchmark of
1.75 percent, while the market implied policy rate for one year’s time has dropped to 1.64 percent from as high as 2.10
percent in May.
If this week’s data reinforce the slowing trend, the dollar-won currency pair may rise above the range of 1,104.95 to 1,144.75 it’s been stuck in since the end of June.