USD/KRW Unchanged As Data Disappoints Struggling South Korean Economy

The South Korean won is trading sideways against the US dollar on Tuesday as the national economy failed to improve in August as the effects of COVID-19 continue to linger in one of Asia’s biggest economies. With the coronavirus pandemic diminishing in Seoul, could one of Asia’s worst-performing currencies turn things around in the final quarter of 2020?

Industrial output fell 0.7% in August, down from the 1.9% increase in July. The annualized rate dropped 3%, worse than the market forecast of 2.8%. Manufacturing production also declined 3.1% in August, down from the 2.2% drop in the previous month. Construction output plunged at 9.4% year-over-year.
Retail sales did surprise market observers, climbing 3% in August, up from the 6% contraction in July.
The Bank of Korea‘s Business Survey Index improved slightly month-to-month, rising from 66 in July to 68 in August. This was the best reading since January, and it represented the fourth consecutive monthly gain. It should be noted that business conditions at non-manufacturing businesses dipped from 66 to 62.
This week, trade data and the manufacturing purchasing managers’ index (PMI) will be released for September. Analysts forecast a 2% gain in exports and a 4.9% slump in imports. They are also anticipating the PMI reading to stay in contraction territory.
After some consternation that South Korea would return to another lockdown amid rising COVID-19 cases, the nation flattened the curve once again. The number of new infections has decreased to double digits, bringing the total to more than 23,000.
The benchmark KOSPI Composite Index has failed to gain much traction over the last month, slumping close to 1% in September. It did finish the Tuesday trading session up 0.86% to settle at 2,327.89.
The South Korean bond market was mixed. The benchmark ten-year yield edged up 0.4 basis point to 1.43%, the two-year bond slipped 0.8 basis point to 0.792%, and the ultra-long 50-year bond dipped 0.7 basis point to 1.605%.
The USD/KRW currency pair was unchanged at 1,167.37 at 14:06 GMT on Tuesday. The EUR/KRW climbed 0.57% to 1,369.80, from an opening of 1,361.77.
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