BOK Governor Says It Won’t Tolerate One-Way Moves in Won-Dollar Rate

Warning on won volatility

Bank of Korea Governor Shin Hyun-song said the central bank would respond firmly to excessive one-way moves in the won-dollar exchange rate, in a warning aimed at calming market jitters after recent currency swings.

Shin made the remarks on May 28 at a press briefing after the Monetary Policy Board held the benchmark interest rate at 2.50%.

“I will respond very firmly to one-way moves in the exchange rate,” he said.

The BOK “will not tolerate one-way moves in the exchange rate,” Shin added. “We have the tools, we have the will, and we have various methods. It is necessary to make that clear.”

The board left the policy rate unchanged for an eighth straight meeting. In its statement, it said the won-dollar exchange rate had climbed back to around 1,500 won per dollar as the US dollar strengthened and foreign investors continued net selling of local stocks.

Shin’s remarks indicate the BOK could respond actively if exchange-rate moves become excessively one-sided and deviate from underlying fundamentals. With upside pressure on inflation and financial-market instability building at the same time, exchange-rate stability is emerging as a key variable for future monetary policy.

Oh Se-sung, Hankyung.com reporter sesung@hankyung.com