Bank of America examined how the Korean won (KRW) responded to three events in the past that were considered as “destabilizing” in the region:
Bank of America Merrill Lynch says there are two possible paths from here: a reduction in tensions or an escalation. The bank examined how the Korean won (KRW) responded to three events in the past that were considered as “destabilizing” in the region:
BAML found that the won fell in all three instances, with the largest drop being almost 2% in November 2010. Every instance saw the move completely retraced within eight to 14 business days.
Interestingly, this time around, the won fell by 0.6% in the two days following the event but is now actually stronger by 1.5% at 113.36 per dollar. That is likely due to broad-based dollar weakness that has developed over the past week, in addition to the Bank of Korea lifting its growth forecast.
