Korea’s won has had a dreadful 2019, and according to Deutsche Bank AG, that poor run against the greenback is likely to persist a little more.
Seoul’s head of fixed income and currencies Choi Kyungjin said that the currently worst performing currency in Asia in 2019 is likely to continue depreciating to the level of 1200 against the U.S. dollar.
This is due to growth concerns and frustrations concerning the size of a supplementary budget that has failed to inspire.
Choi said that the market had lost confidence in Asia’s economy within a very short time. Markets should anticipate the semiconductor industry “picks up” as the automobile and shipbuilding industries remain economically low.
More predictions have come up that the Korean bank will slash its rates following last week’s data which depicted a sudden shrink in the economy in Q1 when exports went down and semiconductors’ demand also reduced.
During the same time, the won violated a key support level stretching losses to trade lower than has been in two years. And with pressures from elsewhere, the currency is hemmed in for more slides.
The won was trading at 1,168.10 on Tuesday after it fell 2.8% against the U.S. dollar in April. The three-year bond yields have gone down by 39 basis points compared to last October’s high. They recorded a low of 1.695% which is below the policy rate of the Bank of Korea, 1.75%.
It is evident that the decline in export has reached the lowest level. Shipments registered a low of 2% by value compared to last years’, although this is still way better than the expected decline of 5.9 %.
On Tuesday, Samsung Electronics Co. also joined the wagon in betting a drop in the prices of semiconductors in the second half of 2019. Last week the government shared that it intends to come up with an extra budgetary allocation of $5.8 billion (6.7 trillion won).
Parliament may, however, delay the approval, with the impact being that the Bank of Korea moves to lower rates as soon as it is possible.