KRW was the worst performing Asian currency in July, dropping by 4.5% against the USD. The domestic data was not all that bad. Rather, the main factor behind KRW's sharp underperformance was technically driven as USD/KRW traded through the previous high of 1139.6 from March 2015.



Adding to KRW's downside was the late July release of preliminary Q2 GDP which came in lower than expected at 2.2%.



Though KRW is veiwed bearish, the selloff has unfolded much faster than anticipated. The consolidation in KRW is overdue. Fundamentally, signs CPI inflation basing encouraged a bearish view (July: 0.2%m/m, 0.7%y/y).



"But inflation remains low and well below the BoK's target band of 2.5 to 3.5%, which will be revised within the year", says RBC capital markets.