BoK Keeps The Interest Rate At 3.5%, USD/KRW Drops Below The 1330 Level
During the early trading session on Thursday, the Bank of Korea (BoK) announced its interest rate decision. The Bank of Korea has made no changes to the policy rate, which means the interest rate is still present near 3.5% in the country.
The decision by the BoK was in line with the forecasts made by the market players and thus was not a surprise at all. The Bank of Korea also keeps its inflation & GDP forecast for 2023 unchanged as well. The Korean central bank believes that inflation will be around 3.5% while the GDP for 2023 will be around 1.4%.
USD/KRW Trades Near 1326
Although the results were not a surprise to anyone, the USD/KRW pair did turn lower and hit its 2-week lows. For the day, the USD/KRW is down by 0.10% and currently trades near the 1326 level.
If we look back, the Bank of Korea has kept the policy rate at 3.5% since the start of February 2023. When we combine this with the USD weakness, it appears that the obvious choice for the USD/KRW is towards the downside.
Overall, it's the 4th time that the BoK has made no change to its benchmark rates. The reason behind that is the expectations of the central bank that domestic growth is showing signs of improvement. In addition, the BoK also expects inflation to rise a little higher than the forecast.
The BoK also talked about how the economic condition in China is uncertain along with the jump in housing prices. Furthermore, the central bank also talked about how the non-banking part of the financial sector now has fewer fears.
In general, the KRW can turn bullish on hawkish comments from the BoK while dovish comments about the rates can lead to a bearish KRW. As for the current condition, the USD is showing weakness which is allowing the KRW to truly shine.