• Bank of Korea cut rates by 50 bps to a new record low of 0.75% at an emergency meeting yesterday.
• The decision was attributed to the deterioration in growth outlook from COVID-19 and the Fed’s decision to slash rates to near zero. The rate cut was the first of its kind in over ten years, as policymakers try to reduce the economic fallout from the coronavirus outbreak. The decision follows the US Federal Reserve's Sunday move to lower rates to near zero. 
• Given that growth uncertainties remain high amidst positive USDKRW rate differentials, the BOK has scope to trim rates further.
• Zero/negative interest rates and QE remain unlikely, in our view.
• Implication for further forecasts: We are adding one more 25bps rate cut into our forecast, which will take the benchmark rate to 0.50% by end-2Q.
• On the back of attractive pricing, long skews and correlations USD/Asia constructs offer a cheap solution for expressing Coronavirus hedges in a directional format. 
• Long USD skews and correlations, therefore, offer a cheap entry point for hedging the emergence of the Coronavirus as a pandemics and a factor capable of upsetting the risk-loving narrative markets had enjoyed since end of last year. Rather than expressing the hedges as pure vol plays, some of which have been already discussed, we prefer considering two low-premium / high-payout structures that benefit from current market parameters. This tactically guides in favoring short-dated Expiries (1M). 
• Overall, it summarizes the disconnect between global markets and FX vol pricing continues, with the latter displaying little reaction to the risk that Coronavirus could turn into a world epidemic.
• Contemplating above factors consider: 1M At-Expiry-Digital (USDINR >2% OTMS; USDKRW > 2% OTMS; USDSGD > 2% OTMS) call @ 2.8/4.8% indicative. 1M ATMS worst-of basket USD ATM call on (USDINR, USDKRW, USDSGD) @ 0.225/0.275% indicative. Courtesy: JPM