Bank of Korea Governor Nominee Warns of Action if Korean Won Weakens Further

South Korea's Bank of Korea governor nominee, Shin Hyun-song, signaled on Monday that policymakers stand ready to intervene should the Korean won experience excessive depreciation. In written statements submitted to parliament ahead of his confirmation hearing scheduled for Wednesday, Shin emphasized the need for close monitoring of foreign exchange market conditions amid ongoing global uncertainty.

While the dollar-won exchange rate recently eased to around the 1,480 level, Shin noted that the won's decline since the outbreak of the Middle East conflict has been more pronounced compared to other major currencies. On Monday alone, the won slid as much as 1.1%, reaching 1,499.7 against the dollar, following the collapse of weekend negotiations between the United States and Iran over the ongoing war in the region.

Despite the currency's volatility, Shin reassured lawmakers that current liquidity conditions remain stable, suggesting that the exchange rate level itself is not yet a cause for alarm. He declined, however, to provide a specific outlook on where exchange rates are headed, keeping his forward guidance measured and cautious.

On the topic of monetary policy, Shin indicated that rising inflation pressures stemming from the Middle East conflict would be a primary consideration in future interest rate decisions, according to reporting by Yonhap News Agency. At the same time, he acknowledged that downward risks to economic growth are being partially offset by strong semiconductor exports and a government-approved extra budget.

Last week, the Bank of Korea held its benchmark policy interest rate steady while flagging significant uncertainty in the economic outlook. The central bank also revised its growth forecasts downward and raised its inflation projections, reflecting the complex challenges South Korea faces amid geopolitical tensions and shifting global trade dynamics.