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Rhee Chang-yong, the Governor of the Bank of Korea (BOK), expressed optimism that the won-dollar exchange rate could move towards stabilization provided tensions in the Middle East do not escalate further. Addressing concerns stemming from recent developments in the region, Rhee highlighted the “many uncertainties” surrounding the situation during a meeting with South Korean correspondents on Friday.
The recent depreciation of the Korean won has raised concerns, exacerbated by expectations of potential rate cuts by the U.S. Federal Reserve due to persistent inflationary pressures. Further contributing to market anxieties are recent events involving Iran’s drone and missile attack on Israel, coupled with Israel’s subsequent actions, which have heightened fears of a broader regional conflict and disruptions to key commercial activities, including oil shipments.
Rhee emphasized the significant impact of Middle East developments on South Korea’s economy, particularly its heavy reliance on the region for oil imports. He noted the prevailing prediction that the conflict may not escalate further, but emphasized the need for continued monitoring of the situation.
The issue of exchange rates also featured prominently during discussions between South Korea, the United States, and Japan, with the finance ministers of these countries expressing “serious concerns” over the sharp depreciation of the South Korean won and Japanese yen. Rhee underscored the significance of this acknowledgment, highlighting the joint effort to address currency depreciation and stabilize foreign exchange market volatility.
Recent market fluctuations saw the Korean won dip to 1,400 won per dollar during Tuesday’s intraday trading, marking its lowest level since 2022 before closing at 1,394.50 won. In response, Finance Minister Choi Sang-mok, U.S. Treasury Secretary Janet Yellen, and Japan’s Finance Minister Shunichi Suzuki issued a joint statement to address concerns over currency depreciation and mitigate market volatility.
Commenting on the U.S.’s assertion regarding China’s overcapacity, Rhee acknowledged differing perspectives on the issue, emphasizing the importance of considering domestic market dynamics and export perspectives in addressing the challenge. He underscored the need for a multifaceted approach, encompassing economic theories and negotiations, to effectively address concerns related to China’s production practices.
Rhee’s insights were shared during his participation in various international meetings, including the annual gatherings of the International Monetary Fund, the World Bank, and discussions involving Group of 20 finance chiefs and top central bankers, held in the U.S. capital.
