SOUTH KOREA: Risks Stemming from BOK Bias Tomorrow
- Bond yields are lower today by 1-3bps ahead of tomorrow's BOK decision, having peaked in early November. The peak was driven by the realities of the focus on the housing sector. However recent declines in yields are correlated to the re-pricing of FED rate expectations.
- 3-Yr yields peaked in early November at 2.95% and are currently at 2.88%.
- Most board members of South Korea's central bank expressed caution about further policy easing as they kept interest rates unchanged at their last meeting on October 23. The Bank of Korea voted 6-1 to keep its rates unchanged at 2.50% amidst worries about an overheated housing market and a weak currency, though four members left the door open for a rate cut in the next three months.
- Looking ahead to the risks for tomorrow’s meeting, they are found mainly in what the forward-looking bias will be from the voting members.
- If all four members retaining their bias for easing, the focus for bond markets will likely stay with the Federal Reserve December meeting.
- A reduction in the number of members with an easing bias could see markets begin to price more rate hikes in the back end of next year. Our swaps model currently has +9bps of hikes priced in a year's time. This from +15bps a week ago.
- With consensus strongly in favour of a hold, and yields tracking FED expectations, a significant reduction in the easing bias could see an increase in rate hike expectations next year.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
THAILAND: Thailand Sees Strong Global Demand For Its Products
September customs export growth was significantly stronger than Bloomberg consensus expected rising 19.0% y/y after 5.8%, highest since March 2022. While imports were also higher up 17.2% y/y following 15.8%, the pickup in shipments was enough to return the merchandise trade balance to surplus at $1275mn after August’s deficit of $1964mn. The Bank of Thailand expects slower exports in H2 to be a drive of slower GDP growth. The full goods trade data are released Friday.
- The smoother 3-month average rates of import and export growth were in line with the recent trend.
Thailand customs trade y/y% 3-month moving average
- 19% US import duties don’t appear to have impacted exports yet with shipments to the US up 35% y/y in September driven by telecoms & tech-related items.
- Thai imports from China have been elevated in 2025 running at over 22% y/y on average and so some of this growth to the US may reflect a channelling of goods through Thailand to avoid higher tariffs, especially as Thai domestic demand has been soft. In its agreement with the US, Thailand said it would work to prevent this redirection.
- The Ministry of Commerce noted that the strong export result was due to strong demand from Thailand’s major destinations and less global uncertainty following US trade deals across the globe.
MNI EXCLUSIVE: China Industry Expert On The Auto Sales Outlook
FOREX: USD/JPY Above 153.00 As US-China Trade Optimism Drives Risk On
Broader USD index levels are little changed with the focus in crosses, particularly in terms of the yen, due to risk on induced by positive weekend US-China trade talks. The BBDXY index was last near 1213.20. USD/JPY is looking to consolidate its break above 153.00, while higher beta plays like AUD are outperforming (albeit away from session highs versus the USD). Cross asset sentiment has seen US equity futures surge, while US Tsy yields are also higher, so playing into a weaker yen trend.
- The headlines that emerged from the weekend trade talks between the US and China, point to broad agreements in key areas, with the US side focused on rare earths and soybean purchases (while US Tsy Bessent stated that a 100% tariff rate risk was effectively off the table). A China official noted that a preliminary consensus had been reached on topics around export controls, fentanyl and shipping levies (per BBG).
- More details may emerge on Thursday (in terms of what exactly has been agreed to and on what time frame), when US President Trump and China President XI are expected to meet in South Korea and ratify an agreement. For now though markets are happy to trade risk on.
- USD/JPY sits close to session highs, last near 153.10/15, with the bull trigger of 153.27, the Oct 10 high, nearby. Japan officials noted they were monitoring FX markets (for disorderly moves), but the remarks didn't suggest intervention risks were more heightened.
- AUD/JPY got above 100.00 earlier but found selling interest, while AUD/USD couldn't sustained an earlier break above the 50-day EMA (highs at 0.6547, last near 0.6530). We do have a RBA Bullock Fireside chat later, early evening Australian time.
- NZD/USD got to fresh highs of 0.5788, but is now 0.5755/60, but the technical bias still looks positive from earlier Oct lows.
- Later October Dallas Fed manufacturing and October German Ifo survey are released. The ECB’s Elderson and Tuominen speak.
