North Korea has decided yesterday to close the Gaeseong industrial complex that it would operate with the South together. This was in respond to South Korea's decision to shut down operations earlier in the day after North Korea's rocket launch and nuclear test over the past few weeks.

At the same time, North Korea said that it will cut the Inter-Korean communication hotlines. In 2004, the complex was opened to promote cooperation between the two sides.

Before it was shut, a total of 124 South Korean companies were operating in the complex, employing more than 54,000 North Korean workers in the production of labour-intensive goods.

The shutdown is not the first time it has happened, with North Korea previously withdrawing its workers for several months in 2013 following a dispute back then.

The South Korean economy advanced 0.6% on quarter in the three months to December of 2015, easing from a 1.3% expansion in the previous period while staying slightly below market expectations, first estimates showed.

The BoK kept its benchmark rate steady at 1.5% in December for the sixth straight month, as widely expected.

Furthermore, with BoK paying greater attention to financial stability risks from high household debt (84.3% of GDP at end-2014), we see little urgency to ease again and we think BoK will tolerate more KRW weakness as a result.

KRW's volatility surged to the as tensions on the Korean Peninsula continues to mount. As a result at the money volatility realized by FX spot remains elevated across the curve, with one week tenor hitting the highest since October 2015 and three months tenor hitting highest values first time since January 2016.

Whereas the at-the-money volatility implied by FX options remains elevated across the curve, with three-month expiries spiking the highest since 2013.