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Another interest rate cut from the Bank of Korea on the way? – FXStreet

FXStreet (Barcelona) - FXStreet Editor and Analyst Omkar Godbole, views that post the PBoC rate cut, pressure may build on Bank of Korea to cut rates again.

Key Quotes

“With weak growth prospects along with CPI inflation at 1.2% in October, Korea risks importing deflation if the Yuan weakens along with the Yen. The Bank of Korea has a three‐year 2.5 to 3.5% inflation target band, but annual inflation has stayed in the 1% range since January 2013.”

“The PBoC’s rate cut last week has certainly increased pressure on the central banks in Asia to act.”

“However, Bank of Korea is likely to wait and watch the movement in the JPY/KRW and CNY/KRW pair. So far, both pairs are trading steady.”

“The JPY/KRW is already trading at July 2008 levels. Technically, if the pair fails to rise above 10.00 levels, the Won could extend gains to 9.00 and 8.60 levels.”

“The CNY/KRW pair is stuck around 181.50‐182.00 levels, after rising more than 10% since the beginning of Jan 2014.”

“So far, the CNY/KRW exchange rate has not resulted in sudden and sharp appreciation of Won against the Yuan, despite China announcing a rate cut on Friday.”

“A further rise in the USD/JPY pair along with a rise in the USD/CNY shall make another interest rate cut from the Bank of Korea inevitable.”

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