Bank of Korea Governor Rhee Chang-yong indicated the institution’s readiness to address any fluctuations in the country’s currency on Wednesday, highlighting the capability and willingness to intervene in the market to stabilize the won.
Rhee also noted that the BOK’s decision-making regarding monetary policy has been complicated by the anticipated delay in the U.S. interest rate cut and persistent domestic inflationary pressures.
The diminishing likelihood of an immediate rate cut by the U.S. Federal Reserve has created challenges for the won, Rhee explained during a panel session at the International Monetary Fund in Washington. 
He acknowledged that the recent movements in the South Korean won deviated somewhat from market fundamentals, contrasting the current situation with the scenario in mid-2022 when the dollar was strengthening steadily due to expectations of sustained high U.S. interest rates.
Rhee emphasized that the current circumstances are distinct, with the dollar’s ascent driven primarily by expectations of a postponement in the Fed’s initial rate cut.
He expressed optimism that once uncertainty surrounding the timing of U.S. rate adjustments diminishes, the pressure on emerging market currencies, including the won, will ease.
Rhee anticipated that the impact of U.S. monetary policy changes on emerging market exchange rates would be temporary compared to similar developments around a year and a half ago.
Reflecting on the past year, Rhee highlighted the initial anticipation that the BOK could pursue monetary policy more independently following indications from the U.S. Federal Reserve about a possible near-term rate reduction.
However, he observed that this outlook shifted due to diminishing prospects of an immediate Fed rate cut, coupled with persistent domestic inflationary pressures, which could elevate inflation expectations.
Navigating the timing of a policy pivot poses challenges, Rhee admitted, emphasizing the need for further evidence of decreasing inflation in line with expectations before making significant adjustments.
