The USD/KRW tilted upwards after the Bank of Korea (BOK) delivered its interest rate decision. The pair rose to 1,170, which was a few points below the highest point this week.
Bank of Korea rate decision
The Bank of Korea concluded its monetary policy decision on Thursday and did what most analysts were expecting. It decided to hike interest rates by 25-basis points to 0.75%. By so doing, it became the first big Asian central bank to start exiting its low-interest rate regime.
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The decision came as the South Korean economy continues doing well. The strong international demand for computer chips and other electronics has helped the country stage a strong recovery. Indeed, analysts expect that it will rebound by about 4% this year.
At the same time, consumer spending has risen while inflation remains within the bank’s range. For example, house prices rose by 14.3% year on year in July, the fastest growth since 2002. Also, household debt rose by 10.3% while retail sales have done relatively well.
Therefore, economists believe that the bank will make at least one more rate hike this year. Also, there are questions about other Asian central banks that will hike rates this year. In a note, an analyst at KB Securities said:
“The BOK just couldn’t wait any longer when it has consistently stressed its focus on household debt and financial imbalances. It’s not like the economy is plunging amid the latest virus wave, but household debt is something that can’t be ignored anymore.”
The USD/KRW also rose ahead of a relatively busy trading session. Later today, the US will publish the second preliminary GDP data. Economists expect these numbers to show that the economy expanded by 6.7% in Q2. This will be a better reading than the first estimate of 6.5%. The statistics agency will also publish the second-quarter personal consumption expenditure data.
Meanwhile, the USD/KRW will also react to the Jackson Hole summit that will take place virtually on Thursday and Friday.
USD/KRW technical outlook
The daily chart shows that the USD/KRW pair has been in a strong bullish trend recently. The pair has managed to rise above the 38.2% Fibonacci retracement level. It has also moved above the key support at 1145, which was the highest level on March 9. The pair has risen above the 25-day and 50-day weighted moving average (WMA) while the Relative Strength Index has been in a strong bullish trend. Therefore, the pair will likely maintain the bullish trend as investors eye the key resistance at 1200.
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