Elias Haddad of Brown Brothers Harriman (BBH) highlights that the Korean won has been underperforming, with the USD/KRW exchange rate rising to its highest level since 2009. Haddad attributes this weakness to South Korea’s negative net energy balance and negative real interest rates, and while authorities promise to curb excessive currency movements, the intervention is seen only as slowing, not reversing, the depreciation of the KRW during the ongoing energy shock.

The authorities are fighting the delicate Won

“KRW has performed poorly overall, with USD/KRW rising to 1,540.55, its highest level since March 2009.”

“The decline in KRW largely reflects South Korea’s negative net energy balance and negative real rates.”

“South Korea again vowed today to curb excessive unilateral currency movements.”

“However, until the energy shock has passed, currency intervention is more likely to slow the depreciation of the KRW than to alleviate its massive undervaluation.”

(This article was created with the facilitate of an artificial intelligence tool and has been reviewed by an editor.)