The South Korean won moved sideways on Tuesday morning after the country published the latest consumer price index (CPI) data. The USD/KRW was trading at 1,309.63, where it has been in the past few days. This price is ~7 70% above the lowest level in March.
South Korean inflation cools
The South Korean consumer inflation continued dropping in March as energy prices pulled back. According to the country’s statistics bureau, the headline consumer price index dropped to 4.2% in March from the previous 4.8%. This decline was higher than the median estimate of 4.3%.
South Korea’s inflation has been in a downward trend in the past few months after it peaked at 6.3% in July last year. Inflation dropped from 0.3% to 0.2% on a monthly basis.
The statistics agency attributed the drop to the relatively weak energy prices. After peaking at $138 in 2022, the price of crude oil dropped to below $70 per barrel in March. This changed on Monday after OPEC announced that it will slash over 1.7 million barrels per day.
The South Korean economy has been going through a rough patch in the past few months as computer chips demand waned. On Monday, data showed that the manufacturing PMI dropped from 48.5 in February to 47.6 in March. A PMI reading of below 50 is a sign that an industry is contracting..
On Friday, data showed that South Korea’s exports dropped by 13.6% as chips demand waned. They have dropped for six straight months, which has pushed the country into a trade deficit.
Like other central banks, the Bank of Korea has been relatively hawkish in the past few months. In February, the bank decided to leave interest rates unchanged at 3.5% but maintained a hawkish tilt. It had previously hiked rates for several consecutive meetings since 2022.
There will be no major catalyst for the USD/KRW on Tuesday. The only data to watch will be the upcoming American job vacancy numbers. Analysts believe that the country’s vacancies dropped to about 10 million in February.
USD/KRW technical analysis
USDKRW chart by TradingView
The daily chart shows that the USD/KRW exchange rate tilted upwards after the latest South Korean inflation data. It remained inside the small descending channel shown in blue. Also, the pair moved slightly above the 50-day moving average while the Relative Strength Index tilted upwards.
The USD to South Korean won exchange rate will likely remain in this channel and then have a bullish break-out in the coming days. If this happens, the next key resistance level to watch will be at 1,362.
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