A Bad Year for the South Korean Won May Be About to Get Worse

(Bloomberg) -- South Korea’s won has been the worst-performing Asian currency this year. Data this week may add to its woes.

Industrial production and consumer confidence numbers will be in focus as traders seek to gauge whether the recent weakness in exports and inflation is spreading. Signs of slower growth may fuel bets the Bank of Korea will follow the Federal Reserve in turning more dovish, quickening the won’s decline.

“The data has run a lot weaker than I had bargained on," said Rob Carnell, Asia-Pacific head of research and chief economist at ING Bank NV in Singapore. ‘‘If anything, the Federal Reserve’s decision makes it more likely the Bank of Korea cuts.”

Most emerging Asian currencies have strengthened this year as U.S.-China trade tensions have eased and the Fed has stopped raising interest rates. The won has been the odd one out, falling 1.3 percent.

Industrial production slowed to a four-month low of 0.1 percent in January, and if February’s data due Friday confirm that trend, the won’s losses may escalate. Consumer confidence numbers for March are due Wednesday, and a manufacturing sentiment survey on Thursday.

Traders have been building bets the Bank of Korea is poised to cut interest rates for the first time in three years, even though Governor Lee Ju-yeol has sought to damp that speculation. Three-year bond yields are approaching the central bank’s benchmark of 1.75 percent, while the market implied policy rate for one year’s time has dropped to 1.64 percent from as high as 2.10 percent in May.

If this week’s data reinforce the slowing trend, the dollar-won currency pair may rise above the range of 1,104.95 to 1,144.75 it’s been stuck in since the end of June. Technicals suggest that if it breaches the upper end of that band, it may test the July 2017 high of 1,157.90. The pair closed Friday at 1,130.20.

Below are key Asian economic data and events due:

• Monday, March 25: Japan all industry activity index, BOJ’s Harada speaks, Singapore CPI
• Tuesday, March 26: RBA’s Ellis speaks, New Zealand trade balance, Japan PPI and BOJ’s summary of opinions, Singapore industrial production
• Wednesday, March 27: RBNZ rate decision, RBA’s Kent in Sydney panel, China industrial profits, South Korea consumer confidence
• Thursday, March 28: Australia job vacancies, New Zealand business confidence, South Korea business survey manufacturing
• Friday, March 29: New Zealand building permits, Japan jobless rate, industrial production, retail sales and Tokyo CPI, China 4Q BoP current-account balance, South Korea industrial production, Philippines budget balance, Thailand BoP current-account balance

--With assistance from Masaki Kondo.

To contact the reporters on this story: David Finnerty in Singapore at dfinnerty4@bloomberg.net;Hooyeon Kim in Seoul at hkim592@bloomberg.net

To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Liau Y-Sing, Nicholas Reynolds

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