Won Weakens As BoK Sets Scene For Rate Cut (Albeit With Caveats)

Spot USD/KRW is tracking back towards intra-session highs from Wednesday trade. The pair last near 1338.5, around 0.35% weaker for the session so far. This leaves the won underperforming the G10 higher beta plays and most of Asia FX (although IDR is off by slightly more).

• Wednesday highs were marked at 1340, while late last week we around 1355, in terms of upside targets. Recent lows at 1325 remain intact.
• The BOK decision of no change was widely expected, although 4 out of 6 board members now see the door open for lower rates in the next 3 months. This, coupled with slightly lower growth projections, is likely to pave the way for the easing cycle to commence.
• Still comments form Governor Rhee have likely tempered bearish won sentiment at the margins. The Governor stated that forward guidance doesn't guarantee a cut and that the BOK rate cutting path would be more modest compared to the US. Rhee also stated the decline in onshore 3yr and 10bond yields were excessive.
• Elsewhere, equity sentiment is slightly softer, a likely headwind at the margins for the won.