AI chipmaker Nvidia Corp.’s better-than expected earnings may be the catalyst the tech-reliant Korean won is looking for.
The currency has been Asia’s worst performing this month, on the back of falling exports, disappointing Chinese growth and higher US yields. The won has weakened 3.8% versus the dollar in August.
The hope is that Nvidia’s blowout sales forecast is a sign of broader demand in the industry for AI processors, and will spell booming exports for its suppliers such as SK Hynix Inc. Following Nvidia’s results last week, the won closed 1.3% stronger while shares for SK Hynix gained 4.2%.
Investors will now be monitoring Korea’s trade data for August, after the first twenty days of the month showed a fall of 16.5% compared to last year.
“We see a negative correlation between the stock price of Korean chipmakers and dollar-won,” said Min Joo Kang, senior economist at ING Bank NV in Seoul. “Indeed, the surprise of Nvidia is a market-moving event at least for the short term until we hear another disappointing data or news about China’s slowdown.”
Min sees the won rising to 1,300 versus the dollar by the end of the third quarter. It closed at 1,324.78 on Friday.
Bullish traders already have positive signs to lean on. It failed to breach resistance of 1,343 versus the greenback last week, and technical data shows the Asian currency in oversold territory, according to slow stochastics - an indicator that measures momentum.
However, even after Nvidia’s results, the won still faces the challenge of China’s slowing economy, easily Korea’s biggest export market. Pressure on the currency could resurface as soon as this week if China’s manufacturing PMI for August remains in contractionary territory for a fifth consecutive month.
“There are still headwinds faced by the won, given China’s economic and debt woes which have yet to be sorted out, even though we think global semiconductors may have seen the trough,” says Irene Cheung, FX strategist at ANZ banking Group in Singapore.
Here are the key Asian economic data due this week:
- Monday, Aug. 28: Australia retail sales
- Tuesday, Aug. 29: Reserve Bank of Australia’s Bullock speaks
- Wednesday, Aug. 30: Australia July CPI, building approvals and 2Q construction work done
- Thursday, Aug. 31: China PMI’s, India 2Q GDP, Australia 2Q private capex, Japan retail sales and industrial production, New Zealand business confidence and house prices, South Korea industrial production, Thailand BoP current account and trade balances
- Friday, Sept. 1: South Korea trade balance, Indonesia CPI, Japan 2Q capital spending, Australia home loans, China Caixin manufacturing PMI, New Zealand consumer confidence, Thailand business sentiment
--With assistance from Hooyeon Kim.