[Exchange Rate 1400 Won] 1 Dollar Equals 1400 Won... Bank of Korea Suggests Possibility of 'Big Step'

Fed's Reaffirmation of Aggressive Tightening Deepens Strong Dollar
Won-Dollar Exchange Rate Hits 1400 Won for First Time Since Financial Crisis
Governor Lee Chang-yong Says "Assumptions Have Changed"... Hints at Big Step Increase

On the 22nd, when the won-dollar exchange rate surpassed 1,400 won for the first time in 13 years and 6 months, dealers were working in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Moon Honam munonam@

The won-dollar exchange rate finally broke through the psychological barrier of 1,400 won. This reflects the full impact of the U.S. Federal Reserve (Fed) implementing a third consecutive 'giant step' (a 0.75 percentage point increase in the base interest rate), reaffirming its high-intensity tightening stance. As the interest rate gap between Korea and the U.S. widens and exchange rate volatility increases, the Bank of Korea is also reconsidering the 'big step' (a 0.50 percentage point increase in the base interest rate) option.

On the 22nd, in the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,398.0 won, up 3.8 won from the previous trading day, and soon surpassed 1,400 won, setting a new high. It is the first time in about 13 years and 6 months since the exchange rate exceeded 1,400 won, last seen on March 31, 2009 (high of 1,422.0 won).

Along with the giant step announced by the Fed on the same day, the dot plot forecasted the base interest rate at 4.4% by the end of this year and 4.6% by the end of next year, significantly higher than previous projections, increasing the possibility of a big step by the Bank of Korea.

Lee Chang-yong, Governor of the Bank of Korea, said at an emergency macroeconomic and financial meeting held at the Bankers' Hall in Myeong-dong, Seoul, "The biggest change since the previous forward guidance is that the market's expectation for the Fed's terminal rate has risen significantly to around 4% or higher," adding, "The precondition for a 0.25 percentage point increase has changed considerably."

This differs from Governor Lee's statement at a press briefing last month, where he said, "It is desirable to maintain a gradual increase of 0.25 percentage points for the time being," and is interpreted as indicating that a big step will be considered at the Monetary Policy Committee meeting on the 12th of next month.

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