Bank of Korea Governor: "Focus on Exchange Rate Volatility Rather Than Target"

by Kim Heeyun

Published 26 Oct.2024 13:45(KST)

Likely to Summarize Position After November US Election Results and Federal Reserve Meeting

Lee Chang-yong, Governor of the Bank of Korea, stated on the 25th (local time) regarding the sharply rising won-dollar exchange rate that “the focus is on volatility rather than a specific target exchange rate.”

Lee Chang-yong, Governor of the Bank of Korea, is attending the National Assembly's Planning and Finance Committee's audit of the Bank of Korea held at the Bank of Korea in Jung-gu, Seoul on the 14th, responding to questions from lawmakers. Photo by Kang Jin-hyung aymsdream@

Governor Lee made this remark during a meeting with Korean correspondents after attending the G20 Finance Ministers and Central Bank Governors Meeting and the International Monetary Fund (IMF) and World Bank Group (WBG) Annual Meetings held in Washington DC, USA. He said, “We pay attention to whether the exchange rate is appreciating or depreciating too quickly.”

He added regarding foreign exchange market intervention, “If the exchange rate exceeds a certain speed and breaks out of the box range, we will consider whether adjustment is necessary.”

Earlier, during the sharp rise of the won-dollar exchange rate in April, Governor Lee had indicated intervention by saying, “Considering market fundamentals, the recent volatility is somewhat excessive,” and “If exchange rate volatility continues, we are prepared to take market stabilization measures and have sufficient means to do so.”

However, unlike in April, the Bank of Korea’s more fundamental stance is interpreted as a judgment that it is necessary to observe the important variable of the U.S. presidential election on November 5th in the background of the recent rise in the won-dollar exchange rate.

Unlike the situation in April, when the rise in the won-dollar exchange rate was localized, accompanied by a weakening of the Japanese yen amid the worsening Middle East crisis, the recent rise in the won-dollar exchange rate is different in that the strong dollar phenomenon is prominent worldwide ahead of the U.S. presidential election, according to the Bank of Korea’s assessment.

Many analyses link the recent prominent dollar strength in the global foreign exchange market to the possibility of former President Donald Trump’s re-election. If Trump is re-elected, his promised introduction of expanded U.S. tariffs is expected to strengthen U.S. inflation and lead to interest rate hikes. The Bank of Korea is expected to decide on foreign exchange market intervention after observing the results of the U.S. presidential election on November 5th and the Federal Open Market Committee (FOMC) meeting on November 6-7.

Meanwhile, Lee Chang-yong and Choi Sang-mok, Deputy Prime Minister for Economic Affairs and Minister of Strategy and Finance, who are visiting the U.S., responded to concerns about the won’s sharp depreciation against the dollar by saying, “The won is weakening due to the global ‘strong dollar’ phenomenon and geopolitical risks in the Middle East,” and “The speed of depreciation is relatively faster compared to other currencies, so the government is closely monitoring the situation.”

On the 25th, Korean time, the weekly closing price of the won against the U.S. dollar in the Seoul foreign exchange market rose by 8.5 won from the previous day to 1,388.7 won. This was the highest weekly closing price since July 3rd (1,390.6 won).