The USD/KRW price continued rising on Monday after South Korea unveiled another set of weak economic numbers. The pair jumped to a high of 1,345, the highest point since November last year. This means that the South Korean won has dropped by over 10% from the highest point in January.
South Korea exports dip
South Korea is facing a major economic challenge amid its reliance on Samsung. Data published by the statistics agency showed that exports dropped by 14.2% in April, worse than the expected decline of 13.5%. In the same period, imports crashed by 13.3%, leading to a trade deficit of over $2.6 billion.
South Korea’s exports have now dropped for seven straight months. This happened as the country’s shipments to China continued dropping. The main reason for this is Samsung, the country’s biggest company.
Last week, Samsung Electronics said that its profits crashed to the lowest level in 14 years in the first quarter. Its semiconductor business lost over $3.4 billion during the quarter as demand for PCs continued dropping. Intel, another rival, also published weak results last week.
Samsung is pivotal for the South Korean economy. As I wrote here, the company accounts for about 15% of the country’s GDP. Therefore, a slump in business growth tends to have an impact on the economy. The country’s economy expanded by just 0.3% in Q1.
The USD/KRW also jumped as a divergence between the Fed and the Bank of Korea continued. In April, the Bank of Korea decided to leave interest rates unchanged at 3.5% and pushed back against expectations of rate cuts later this year.
The Federal Reserve, on the other hand, is expected to hike interest rates by 0.25% this week and then take a strategic pause.
USD/KRW technical analysis
USD/KRW chart by TradingView
The daily chart shows that the USD/KRW pair has been in a bullish trend in the past few weeks. As it rose, the pair jumped above the key resistance point at 1,327, the highest point on March 10. The pair has also moved above the 25-day and 50-day exponential moving averages (EMA). Further, the Relative Strength Index (RSI) has moved slightly above the neutral point.
Therefore, the pair will likely continue rising as buyers target the key resistance point at 1,361.33. A drop below the support at 1,327 will invalidate the bullish view.
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