The USD/KRW currency pair maintained its intraday gains, trading around 1,478.00 during the Asian session on Friday, following the Bank of Korea's (BoK) monetary policy announcement [1]. The BoK kept its benchmark interest rate unchanged at 2.5%, as anticipated, and officials signaled a 'wait and see' approach due to heightened risks stemming from ongoing conflicts in the Middle East, particularly involving Iran [1]. BoK Governor Rhee Chang Yong highlighted that the economic and inflationary impact of the Iran conflict on South Korea is 'bigger' than what was observed during the Ukraine war, emphasizing the need for caution given the volatility of the situation [1].
Incoming BoK Governor Shin Hyun-song reassured markets that stagflation is unlikely and that South Korea's foreign exchange reserves are sufficient to buffer against external shocks, according to Korean Economic Daily (KED) Global [1]. The US Dollar Index (DXY) was reported to be trading marginally higher at 98.88 ahead of the release of the US Consumer Price Index (CPI) data for March, scheduled for 12:30 GMT [1].
Globally, investors are closely monitoring negotiations between the US and Iran regarding a 10-point peace proposal in Pakistan, which is set to take place on Saturday [1]. The BoK's cautious stance and the ongoing geopolitical tensions have contributed to the firmness of the USD/KRW pair, reflecting investor concerns about potential economic disruptions and inflationary pressures [1].
CONCLUSION
The Bank of Korea's decision to maintain rates and adopt a cautious approach amid escalating Iran conflict risks has supported USD/KRW gains. Market sentiment remains watchful, with investors awaiting further developments in US-Iran negotiations and upcoming US CPI data. The BoK's assurances on forex reserves and inflation risks provide some stability, but volatility persists due to geopolitical uncertainties.