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May 7, 2013
Forex Flash: No change expected at upcoming BoK meet - BBH
FXstreet.com (Barcelona) - Brown Brothers Harriman analysts note that the Korean central bank holds a policy meeting Thursday, with no change in policy expected.
They feel that of the EM central banks meeting this week, however, Korea offers the most chance of a dovish surprise. They write, “Inflation was 1.2% y/y in April, a cycle low and below the 2-4% target for six straight months. Yet the BOK has been on hold at 2.75% for seven straight months. Furthermore, the strong won is providing more headwinds for the economy. JPY/KRW is making new lows, and has seen a pretty big move from over 15 in 2012 to around 11 now. We think more actions will be taken to prevent won gains, which would include a surprise rate cut.”
They feel that of the EM central banks meeting this week, however, Korea offers the most chance of a dovish surprise. They write, “Inflation was 1.2% y/y in April, a cycle low and below the 2-4% target for six straight months. Yet the BOK has been on hold at 2.75% for seven straight months. Furthermore, the strong won is providing more headwinds for the economy. JPY/KRW is making new lows, and has seen a pretty big move from over 15 in 2012 to around 11 now. We think more actions will be taken to prevent won gains, which would include a surprise rate cut.”