Emergency as won-dollar tops 1,500… Rhee Chang-yong turned back at the airport [Hankyung FX Market Watch]

"Will respond with the government if needed"

Bank of Korea Governor Rhee Chang-yong postponed an overseas trip and convened an emergency meeting early on the 4th to address the won-dollar exchange rate after it climbed above 1,500 won per dollar. Rhee, who had been scheduled to attend meetings of the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) in Thailand and Basel, Switzerland, reportedly turned back at the airport.

The BOK said it held a “Middle East Situation Review TF Meeting” at 8:30 a.m., chaired by Rhee, to discuss the factors behind the sharp swings in the exchange rate overnight in the London and New York markets and to compare and review FX moves in major countries and South Korea.

The BOK assessed that the current situation is not a cause for concern. It said, “While the exchange rate briefly exceeded 1,500 won, unlike in the past, dollar liquidity is ample, and South Korea’s external borrowing spreads and CDS premium are holding at stable levels.”

However, it expressed concern that volatility could increase for the time being. The BOK said, “Depending on how the Middle East situation develops, heightened volatility in key financial-market price variables such as exchange rates, interest rates and stock prices may persist,” adding, “Even after taking external factors into account, we will closely monitor whether exchange rates and interest rates diverge from domestic fundamentals such as the current account and fluctuate excessively.” It continued, “To prevent market sentiment from becoming one-sided, we will work with the government and respond in a timely manner if necessary.”

Rhee had been set to depart for Thailand on the morning of the day to attend the IMF-hosted “Asia 2050 Conference,” but delayed his schedule as exchange-rate volatility surged. He reportedly went as far as the airport to depart but turned back to convene the emergency meeting. Rhee plans to decide as early as the afternoon whether to leave, after monitoring FX conditions.

Reporter Kang Jin-gyu josep@hankyung.com