Exchange Rate Surpasses 1370 Won 'Sharp Rise'... Government and Bank of Korea Say "External Soundness Stable"

Won-Dollar Exchange Rate Surpasses 1,370 Won... First Time in 13 Years and 5 Months
Heads of Fiscal, Monetary, and Financial Authorities Hold Emergency Meeting Today
Choo Kyung-ho: "External Soundness Indicators at Stable Levels"
Lee Chang-yong: "Won Was Less Depreciated Before"
Market Anxiety Intensifies... Inflation and Economic Uncertainty Rise

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho is taking a commemorative photo with participants at the Emergency Macroeconomic and Financial Meeting held on the 5th at the Bankers' Hall in Jung-gu, Seoul. From the left, Lee Bok-hyun, Governor of the Financial Supervisory Service; Lee Chang-yong, Governor of the Bank of Korea; Deputy Prime Minister Choo; Kim Ju-hyun, Chairman of the Financial Services Commission; Choi Sang-mok, Senior Secretary for Economic Affairs to the President./Photo by Kim Hyun-min kimhyun81@

As the won-dollar exchange rate continuously hits new highs amid the dollar rising to its highest level in 20 years, raising concerns about economic contraction, the heads of fiscal, monetary, and financial authorities overseeing economic policy held an emergency meeting on the morning of the 5th to take preemptive measures.

They reviewed various economic indicators of the Korean economy and reaffirmed the stability of external soundness, focusing on blocking the anxiety of economic agents. However, concerns are growing in the market that a complex crisis situation caused by expanded uncertainties in the current account balance and the sharp rise in the won-dollar exchange rate will continue for a considerable period.

On the morning of the same day, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho and Bank of Korea Governor Lee Chang-yong held an emergency macroeconomic and financial meeting at the Bankers' Hall in Jung-gu, Seoul, together with Financial Services Commission Chairman Kim Joo-hyun, Senior Secretary for Economic Affairs Choi Sang-mok, and Financial Supervisory Service Governor Lee Bok-hyun to review the recent economic and financial situation. This was their first gathering in about a month since July 28.

The reason Deputy Prime Minister Choo and Governor Lee convened the emergency meeting is due to the deepening complex crisis in the domestic economy. According to the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,365 won, up 2.4 won from the previous trading day, hitting a new high immediately after the opening. Later, around 11:13 a.m., it rose to 1,370.1 won, marking the highest level in 13 years and 5 months since April 1, 2009 (1,392.0 won) during the financial crisis.

Deputy Prime Minister Choo pointed out, "The dollar is rising to its highest level in 20 years," adding, "Since August, the deterioration of the trade balance and the weakening of the yuan have overlapped, causing the won-dollar exchange rate to rise rapidly."

However, the government and the Bank of Korea explained that there are no problems with the financial and foreign exchange situation yet. Governor Lee, speaking to reporters immediately after the meeting, responded to a question about whether the won's depreciation is greater compared to the dollar's rise or other currencies by saying, "Previously, we (the won) depreciated less," and "The answer varies depending on the period considered." Deputy Prime Minister Choo also said in his opening remarks, "External soundness indicators are maintaining a stable level without significant changes."

Seoul Myeongdong Hana Bank Headquarters Dealing Room
Photo by Yonhap News

Despite the explanations from the government and the Bank of Korea, concerns about inflation and exchange rates remain in the market. Although the consumer price inflation rate slowed somewhat to 5.7% last month, prices of agricultural products and others may become unstable due to the effects of the monsoon and typhoons, and the rise in import prices caused by the sharp surge in exchange rates could also increase.

The foreign exchange reserves, which serve as a safety net, also decreased again, dropping by 2.18 billion dollars over the past month. In particular, the government mentioned the possibility of a reduction in the current account surplus in the future as the trade balance worsens. Deputy Prime Minister Choo said, "During the Chuseok holiday period, we will operate a joint response system to monitor overseas financial, foreign exchange markets, and the real economy situation in real time."

This content was produced with the assistance of AI translation services.