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BOK chief sees prolonged volatility in FX market amid domestic, global uncertainties

Published: 06 May. 2025, 17:00

Bank of Korea (BOK) Gov. Rhee Chang-yong speaks to reporters at a hotel in Milan on May 6 in this photo provided by the bank. [YONHAP]

Volatility in the foreign exchange (FX) market will likely persist for some time amid uncertainties in the global economy and domestic politics, Korea's top central banker said Tuesday, while reiterating the need for monetary easing to boost the local economy.

"It is still too early to say whether the currency exchange rate has hit the bottom," Bank of Korea (BOK) Gov. Rhee Chang-yong said, referring to the Korean won's recent appreciation against the U.S. dollar.

Rhee made the comments in a meeting with reporters accompanying him to the annual meeting of the Asian Development Bank (ADB) in Milan, where he is also set to take part in gatherings of finance ministers and central bank governors from the Association of Southeast Asian Nations (Asean).

The local currency climbed to 1,391.5 won against the U.S. dollar during after-hours trading Friday, the highest since Nov. 29.

The Korean won had been weakening following former President Yoon Suk Yeol's failed martial law imposition on Dec. 4, dipping to as low as 1,487.6 won per dollar during intraday trading April 9, when the United States' country-specific reciprocal tariffs took effect.

Rhee said Asian currencies, including the Korean won, have been gaining ground partly due to the U.S. administration's pressure on Asian countries to appreciate their currencies, and also on expectations of a potential resumption of trade talks between the United States and China.

"We are not sure whether what the United States really wants is a strong dollar or a weak dollar," he said.

"But the currency exchange rate is not something we can change as we want in the long run," he added, noting Seoul should discuss possible measures with Washington.

Last month, Korea and the United States agreed to discuss the exchange rate issue as part of four major items of bilateral trade talks, which include tariff measures.

On the BOK's monetary policy direction, Rhee told reporters "not to doubt the monetary easing cycle," saying the central bank will cut borrowing costs "sufficiently" considering the economy.

He said the BOK will likely have to slash the growth forecast while lowering lending rates to boost the economy.

Rhee also expressed concerns over the leadership vacuum in Korea amid lingering uncertainties sparked by U.S. President Donald Trump's administration's tariff policies.

"It was a difficult week as we had to explain the current situation in Korea, which is seen as a developed country from the outside," he said, referring to the resignations of former Prime Minister and acting President Han Duck-soo and former Finance Minister Choi Sang-mok last week.

"It is the responsibility of those remaining in their positions to make every possible effort in the ongoing trade negotiations with the United States for the sake of the national interest," he said.

Rhee said the domestic political uncertainties could "significantly weigh on the economy" due to their impact on the country's credit standing and corporate investment, calling for a swift resolution of the situation.

Yonhap