KRW: Upside Faces Consolidation Risk in Policy Week — OCBC

The Korean won extended its gains on the back of exporter and corporate dollar selling and a broadly weaker US dollar, with USD/KRW briefly touching the 1380 level earlier. However, OCBC strategists Sim Moh Siong and Christopher Wong cautioned that the approaching policy week could push the won into a consolidation phase. As of writing, USD/KRW was trading near 1382.15, having rebounded slightly from earlier lows.

**Policy week approaches, consolidation pressure rises**

The Bank of Korea's policy meeting this week is a market focus, and investors' reassessment of the rate path may limit further upside for the won. OCBC strategists believe that despite support from exporter settlements and a weaker dollar, markets tend to adopt a wait-and-see stance before policy decisions, and USD/KRW may face two-way tug-of-war around 1380. According to market reports, Bank of Korea officials have previously expressed concerns about exchange rate volatility, and policy signals could influence short-term direction.

**Dollar backdrop and external variables interweave**

The dollar index has stabilized after a recent overall decline, briefly touching a six-week low during the session, providing a breathing window for Asian currencies like the won. However, a rebound in US Treasury yields and oil price volatility from Middle East tensions still pose potential pressure on the won, a high-beta, net oil-importing currency. OCBC's earlier report also noted that rising oil prices and softening risk sentiment had led the won to underperform in the Asian FX market, highlighting its high sensitivity to external variables.

**Short-term focus on the effectiveness of 1380 support**

On the chart, USD/KRW has seen some buying support around 1380, with the spot price recovering above 1382, indicating a battle near this round level. If the Bank of Korea signals a cautious stance during the policy week, the won's rally could further cool; conversely, if the dollar remains weak, the pair could still re-test 1380 or even lower levels. Market participants suggest focusing on the direction after the policy decision and avoiding over-chasing within the consolidation range.