BOK cut likely to weigh further on KRW

The Bank of Korea (BoK) surprised the market by cutting the base rate by 25bps to 1.75%, a record low - even lower than the level reached during the global financial crisis in 2009. The move was against the market consensus view of no change.

Standard Chartered notes its observations on KRW moves as follows:

• The rate cut is likely to weigh further on the Korean won (KRW) near-term. 
  
  
• Our theme of currency wars and divergence continues to play out. With the USD rallying strongly on building expectations of earlier Fed easing, and also given the KRW's elevated trade-weighted value, the rate cut adds further upside to USD-KRW. 
  
  
• Larger moves in USD-KRW are likely to depend on the central bank's tone at the press conference, which may indicate whether more cuts are expected. 
  
  
• We forecast USDKRW at 1,140 by end-Q1 and 1,1,50 by end-Q2.