BOK: 'Rates, FX diverge from fundamentals… will take market-stabilization measures if needed'

The Bank of Korea (BOK) on the 9th assessed that the recent surge in government bond yields and the won-dollar exchange rate has diverged from Korea’s fundamentals. The BOK also issued remarks tantamount to verbal intervention, saying it would take appropriate market-stabilization measures.

Earlier in the day, the BOK held a meeting of its “Middle East Situation Review Task Force (TF)” chaired by Deputy Governor Yoo Sang-dae to monitor market conditions. The BOK said that over the weekend, concerns in global financial markets about a prolonged Middle East situation drove international oil prices sharply higher, while weak U.S. employment indicators added to the pressure, significantly amplifying risk-off sentiment.

It also judged interest rates—including the won-dollar exchange rate that opened in the 1,490-won range and the three-year government bond yield that had exceeded 3.4% per annum earlier in the day—as “excessive.”

Deputy Governor Yoo said, “Current interest rates and the won exchange rate are showing excessive volatility as they have diverged from our economy’s fundamentals due to risks in the Middle East,” adding, “We will implement appropriate market-stabilization measures if necessary.”

The exchange rate opened at 1,493 won, up 16.6 won from the previous session, and rose as high as 1,498 won intraday.

Reporter Kang Jin-kyu josep@hankyung.com