The key factor of the KRW's devaluation

In my last article, I noted that there are three factors that made the KRW to be depreciated.

(a) The sluggish exports data caused by economic slowdown in China

(b) A few policies to induce overseas investment

(c) A coming of Fed's rate hike

Seemingly, all those factors are reasonable, however, a following chart suggests that the main factor of the depreciation of the KRW is (a).

According the chart above, the recent currency depreciation across the Asian FX market is highly correlated with the export exposure to China. In other words, the slump in Chinese economy has widespread effects on the Asian emerging market.

The thing is, the Chinese economy can't be bounced back in a short time. A growth rate of the Chinese GDP is projected to fall below 7% in the near future, and stock market bubble should be burst anytime soon.

Hence, as long as the Chinese economy remains stagnant, there is no reason to withdraw my outlook of the KRW depreciation. The depreciation of the KRW is not transient but structural.