\setupexternalfigures[location={local,global,default}]

local   : currentdirectory + .. + ../..
global  : paths set with 'directory=...'
default : tex tree

Hi Wolfgang,
I want to draw your attention about what Texshow says \setupexternalfigures:

  global: the whole current project environment
  local: this 'directory' option
  default: the global texmf tree
  none: actual directory
directory: local directory for figure files

The differences I see are:
1) 'local' without 'directory' searches within current folder
2) it also searches in upper and 2 levels upper folders.

Is it new behaviour for mkiv?

Vyatcheslav
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