KRW: USD/KRW Eyeing Break Higher, Amid Firmer USD, BoK Mindful Of Vol

USD/KRW is probing earlier Oct highs, as the market digests the BOK on hold outcome from earlier. Spill over from higher USD/JPY levels is evident (last near 152.50).For USD/KRW we sit just under earlier highs (1435.85), which were levels last seen in early May. A clean break higher could see the 1440/1450 region targeted, see the chart below.

• The BoK kept an easing bias, with 4 out of 6 board members seeing scope to lower rates within 3 months, while one member called for a cut today. Governor Rhee noted the majority of the board were focused on financial stability, and wanted time to assess government measures to cool the housing market. High FX volatility was a both a cautious point and something the central bank needed to monitor.
• This suggests any fresh move higher in USD/KRW may be gradual rather than dramatic. Implied vols support such a bias, as we are back under 8%, well off earlier 2025 highs.
• The won remains a laggard in terms of the lower US-SK rate differentials and still elevated equities (both globally and local), although sentiment looks a little more cautious in this space.
• However, until broader USD sentiment looks softer (particularly from a USD/JPY standpoint, as JPY/KRW levels are watched from a competitiveness standpoint), it may be difficult to call a top in USD/KRW. 

Fig 1: USD/KRW Spot At Risk Of Breaking Higher, But Implied Vols Contained 

Source: Bloomberg Finance L.P./MNI