ING Sees Bank of Korea Limiting Won's Advance After March Surgeby
Dutch lender raises forecast, but says `smoothing' is likely
Drop in exports supports case for BOK interest-rate cut: RBC
ING Groep NV has strengthened it’s year-end forecast for the won after it rose the most since 2009 last month, but says it expects the Bank of Korea to start intervening to limit gains.
The Dutch bank raised its estimate from 1,250 a dollar to 1,140, implying a 1.2 percent advance from current levels. The won is being buoyed by China’s stable yuan policy, Tim Condon, head of Asia research at ING, wrote in a research note Friday. Its 8.2 percent rally in March suggests South Korea’s central bank didn’t do much “smoothing,” and it’s only a matter of time before the monetary authority starts doing so, he wrote.
“They’ll be buying dollars and putting more Korean won into circulation,” Condon said in an interview. “That would take the appreciation pressure off.”
The won weakened 0.9 percent to 1,154.03 a dollar in Seoul, according to data compiled by Bloomberg. The currency had climbed 2.3 percent over the previous four days and is up 1.6 percent so far this year. The won will drop to 1,220 by the end of the year, according to the median estimate in a Bloomberg survey.
Exports fell 8.2 percent in March from a year earlier, figures showed Friday, the 15th decline in a row. A 13.8 percent drop in imports resulted in a trade surplus of $9.8 billion, up from $7.4 billion in February. Consumer prices rose 1 percent in March from a year earlier, less than 1.3 percent the previous month.
“A weak export number is not going to be supportive for further gains in the won from this point," said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd.
The latest export and inflation numbers reinforce the view that the BOK will ease monetary policy again this year, said Sue Trinh, the Hong Kong-based head of Asian currency strategy at Royal Bank of Canada. The lender is forecasting the won will end the year at 1,310 a dollar.
Three-year bonds were little changed, with the yield at 1.45 percent, Korea Exchange prices show. The 10-year yield was steady at 1.79 percent.