KRW: Hedging policy changes point to less selling in USD/KRW forwards - ANZ

Changes to hedging and asset allocation policies at South Korea’s largest pension fund will impact on the KRW’s flow dynamics, according to Irene Cheung, Research Analyst at ANZ.

Key Quotes

“We see a bigger near-term impact on FX forwards as previous hedges are taken out ahead of a zero-hedge policy.”

“For USD/KRW spot, buying pressure will increase over time as a higher percentage of assets get allocated offshore on an unhedged basis.”

“The effects will be magnified if the wider asset management industry in South Korea follows suit. This is possible as USD/KRW forward points go deeper into discount.”