Let me pop up what Rhee said and then why I think the ‘temporary’ comment is critical (for the Bank of Japan, not jus the Bank of Korea):
- Closely watching fx volatility
- Inevitable to raise
GDP forecast - US Treasury shared
view that recent won weakness was temporary - Recently made
comments on fx intervention because volatility was higher than
expected
Like the JPY, the KRW (and many other currencies) have been pummelled by the strong USD, which is benefitting from the higher for longer Federal Reserve Federal Open Market Committee (FOMC), a position we saw reaffirmed on Wednesday.
That comment:
- US Treasury shared view that recent won weakness was temporary
suggests to me that Yellen is not interested in supporting the BoK, or more importantly right now, the BoJ, in helping to intervene.
The weak won and yen is a result of high rate differentials that will pass. And hence, the BoK (and BoJ) are on their own. I said this yesterday when we had the Bank of Japan intervening to pror up the yen in super-thin markets. They don’t want to take on the market in regular liquidity times because they won’t be supported by the US. Anyway, that’s my 2 cents (or zero yen, or whatever it works out at).
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Meanwhile, USD/JPY is on the soft side, testing 153.00 yet again … from a technical perspective I reckon its being tested enough to break down:
This article was written by Eamonn Sheridan at www.forexlive.com. Source