AJU PRESS - ASIA NEWS HUB

Journalist

Kim Yeon-jae김연재

ReporterBank of Korea & Market, Macroeconomics

'Kim Yeon-jae is a journalist at AJU Press (AJP's English platform),
covering macroeconomics, international finance, and geopolitics.
He closely tracks central bank monetary policies, global energy supply chains,
and the Korean defense industry. "Peering into the risks behind the euphoria."

Latest by Kim Yeon-jae

South Korea extends current account surplus streak to 36 months SEOUL, June 5 (AJP) - South Korea extended its current account surplus in April, boosted by strong semiconductor exports, according to preliminary data released by the Bank of Korea on Friday. The country's current account surplus reached US$28.29 billion in April, the second-largest on record, after hitting an all-time high of US$37.93 billion in the previous month. South Korea has now recorded monthly current account surpluses for 36 consecutive months, the second-longest such streak since 2000. The central bank attributed the surplus to a surge in exports driven by strong demand for information technology products, led by semiconductors and computer peripherals. Non-IT exports also rose, as higher global oil prices boosted shipments of petroleum products. "IT products led export growth, while pharmaceuticals, petroleum products and ships also showed high growth rates," Yoo Sung-wook, director general of the BOK's financial statistics department, said during a press briefing. Exports climbed 54.5 percent from a year earlier to $90.59 billion, while imports rose 16.1 percent to $56.70 billion. Exports to Southeast Asia rose 74.2 percent from a year earlier, while shipments to China and the U.S. increased 62.6 percent and 54.0 percent, respectively. Imports also continued to increase, driven by higher crude oil prices amid the prolonged conflict in the Middle East and robust demand for semiconductors and chipmaking equipment. The goods account remained the main driver of the surplus, posting a $33.88 billion surplus, also the second-highest on record. The primary income account, however, swung back into deficit in April, turning into a $2.53 billion shortfall from a US$3.59 billion surplus in March as dividend payments to foreign investors increased. The services account also posted a deficit of $2.42 billion, driven largely by shortfalls in other business services and manufacturing services. Investment income remained in deficit at $2.38 billion, while equity income posted a larger deficit of $3.02 billion. The BOK attributed the deterioration largely to the seasonal concentration of dividend payments in April, with higher payouts among major Korean firms widening the deficit further by increasing outflows to foreign shareholders. Yoo said the April deficit in the primary income account was not unusual, as dividend payments are typically concentrated in April. He added that the shortfall was the largest for any April since 2022, when the deficit reached $3.62 billion. The financial account posted a net asset increase of $25.46 billion during the month. Portfolio investment liabilities rose by $3.51 billion after a sharp decline in March, as foreign investment in Korean debt securities rebounded following South Korea's inclusion in the FTSE World Government Bond Index (WGBI), according to the BOK. 2026-06-05 09:24:21
Hawkish signals fail to curb won's slide SEOUL, June 4 (AJP) - Although the Bank of Korea (BOK) has effectively pivoted back toward monetary tightening, the won-dollar exchange rate is instead plunging to its weakest level since the global financial crisis. Downward pressure on the Korean won is intensifying as investors question how much domestic monetary policy can do on its own. A stronger greenback, surging oil prices and synchronized tightening fears among major central banks are adding to the strain. In the Seoul foreign exchange market on Thursday, the exchange rate opened at 1,530.0 per dollar, down 13.6 won from the previous session's daytime closing price, marking the first time the rate opened in the 1,530 won range in 17 years and three months since March 2009, during the height of the global financial crisis. On a closing basis, the won-dollar exchange rate has already remained in the 1,500 won range for 12 consecutive sessions. Generally, an increase in the benchmark interest rate supports the won's value by boosting yields on won-denominated assets and narrowing the interest rate gap with the United States. This time, however, market dynamics are being driven more by global monetary tightening and commodity price shocks than by the BOK's rate-hiking potential. The won's recent weakness reflects heightened sensitivity to shifts in the global liquidity environment rather than South Korea's own rate path. Consequently, even a 25-basis-point rate hike by the BOK could have its stabilizing effect offset if a stronger dollar, high oil prices and foreign equity liquidation persist. Oil prices above $100 per barrel remain a persistent burden on the South Korean economy, even if the shock has been partially priced in. Given South Korea's heavy reliance on the Strait of Hormuz for most of its crude oil imports, soaring oil prices increase demand for greenbacks to settle energy import bills and raise concerns over a deteriorating trade balance. Adding to the pressure, the growing likelihood of a Bank of Japan rate hike has triggered a broader repricing of monetary policy across major Asian economies. BOJ Governor Kazuo Ueda said the previous day that there is a "clear need" to discuss the appropriateness of a rate hike, warning that delaying normalization could place a growing burden on the economy and the financial system. With the Federal Reserve, the BOK and the Bank of Japan (BOJ) all maintaining a tightening bias, a single 25-basis-point move by the local central bank may not be enough to defend the currency. Amid renewed strength in the greenback, concerns have grown that the U.S. Federal Reserve could pivot back toward a hawkish stance, while international crude prices have surged as cease-fire negotiations in the Middle East war fell back into deadlock. Shrinking foreign exchange reserves are also fueling market anxiety. South Korea's FX reserves stood at $430.66 billion at the end of last November, before the BOK was presumed to have stepped up market-stabilization measures, but fell to $426.99 billion at the end of last month, representing a decline of US$3.67 billion over six months. The latest available global ranking also points to a deterioration, with South Korea falling to 12th as of the end of April from ninth at the end of last November. Aggressive selling of domestic equities by foreign investors is further exacerbating the won's depreciation. Foreign investors offloaded a net 6.6 trillion won worth of KOSPI shares in May alone, adding to dollar demand in the local foreign exchange market. A peculiar anomaly has emerged in the market: even though the exchange rate has failed to pivot stronger, the bond market is weakening as it pre-emptively prices in an interest rate hike. The benchmark three-year government bond yield rose 8.5 basis points to 3.858 percent, its highest level since November 2023, while the 10-year yield climbed 9.4 basis points to 4.229 percent. The broader strain was already visible in May, when the average won-dollar exchange rate weakened to 1,491.39 won from 1,486.72 won in April and the average 10-year yield rose 34.7 basis points to 4.080 percent. The government and financial authorities are also heightening their vigilance. Koo Yun-cheol, Deputy Prime Minister and Minister of Economy and Finance, noted widening volatility in domestic financial and FX markets during a market monitoring meeting on Thursday, signaling that relevant agencies would respond immediately if excessive one-sided moves emerge. While the remarks were closer to a cautionary statement than a heavy-handed verbal intervention, they were interpreted as a sign that authorities could strengthen their response now that the exchange rate has entered the 1,530 won range. Experts stress that active intervention by the central bank and foreign exchange authorities is essential as the high-exchange-rate environment drags on. "There is no entity capable of blocking the exchange rate ceiling other than the foreign exchange authorities," said Lee Nak-won, an FX derivatives specialist at NH Nonghyup Bank, back in March, when the won-dollar rate skyrocketed to the 1,530 won level.l. Ultimately, the crux of the issue lies not in the BOK's rate-hike declaration itself, but in whether global dollar strength, high oil prices and foreign outflow pressure begin to subside. Unless Fed tightening fears cool and crude prices stabilize, reversing the won's downward trajectory through the BOK's baby steps alone will remain an uphill task. 2026-06-04 17:29:01
Won weakens to lowest level since global financial crisis SEOUL, June 4 (AJP) - South Korea's financial markets suffered a sharp sell-off on Thursday as the won fell to a 17-year low past 1,530 per dollar and sovereign bond yields spiked, driven by heavy foreign capital outflows and a trio of external shocks: escalating Middle East tensions, a hawkish Federal Reserve and a surprise monetary tightening signal from Japan. In Seoul's currency market, the won opened at 1,530 per dollar, down 13.6 won from the previous session's close. This marks the first time in 17 years and three months that the exchange rate has kicked off below the 1,530 won threshold since March 10, 2009, during the height of the global financial crisis. Immediately after the opening bell, the rate tumbled to 1,530.8 won before paring some gains to trade in the mid-1,520 won range. However, the high-flying trend persists, with the currency hovering in the 1,500 won range for 12 consecutive sessions on a closing basis. Market analysts attribute the unyielding weakness of the won, despite growing possibilities of a rate hike by the Bank of Korea (BOK), to a compounding stack of external headwinds, chiefly triggered by a hawkish surprise from neighboring Japan that amplified fears of a broader liquidity squeeze across Asia. Bank of Japan (BOJ) governor Kazuo Ueda hinted on Wednesday at a potential interest rate hike at the upcoming June 15–16 policy meeting, citing secondary inflation risks driven by soaring energy costs. "Even amid uncertainty in the Middle East, there is a clear need to discuss the appropriateness of raising interest rates," Ueda said during a lecture in Tokyo, warning that delaying necessary monetary normalization could "inflict a heavy burden on the economy, markets, and the financial system." This regional monetary tightening pressure closely aligns with stubborn inflationary pressures in the U.S., where growing concerns that the Fed might lurch back into a hawkish stance are providing solid, ongoing support for both the U.S. dollar and Treasury yields. Adding to the compounding pressure, renewed military tensions between the United States and Iran have stoked global inflation worries and driven up international crude prices, further exacerbating depreciation pressures on the local currency. South Korea relies on the Strait of Hormuz for nearly 70 percent of its total crude oil imports. Consequently, soaring oil prices trigger an increased demand for the greenback to settle import bills while stoking anxieties over a deteriorating trade balance. Continued profit-taking and portfolio rebalancing by foreign investors in the domestic stock market have further strained won supply and demand. According to the Korea Exchange (KRX), foreign investors net sold 4.8 trillion won worth of shares on the main KOSPI bourse as of noon. The bond market also exhibited a turbulent trend. In the morning session of the Seoul debt market, the benchmark three-year government bond yield closed up 6.6 basis points at 3.839 percent - reaching its highest level since November 2023, when fears of prolonged high interest rates in the U.S. hammered global debt markets. The 10-year government bond yield also rose 7.1 basis points to 4.209 percent - bouncing back to the 4.2 percent range for the first time since mid-May, highlighting renewed weakness in long-term debt. This slump effectively erased the bullish sentiment from Tuesday, when net purchases of 10-year bonds by foreign investors hit the second-highest volume in history. The prospect of a BOJ rate hike raised immediate concerns over a regional liquidity squeeze, triggering heavy offloading of local fixed-income assets. Adding to this was the anxiety of market participants already bracing for the possibility that the Gulf crisis could drive oil prices higher, rekindle domestic consumer inflation, and strengthen the BOK's justification for rate hikes. 2026-06-04 14:13:55
Financial chiefs vow to tighten scrutiny on stock leverage amid overheated rally SEOUL, June 4 (AJP) - South Korea's top economic and financial policymakers on Thursday pledged to strengthen preemptive risk checks on borrowing-backed stock trading, as a rapid market rally fuels concerns that excessive leverage could amplify losses for retail investors and destabilize broader financial markets. Deputy Prime Minister and Finance Minister Koo Yun-cheol chaired a joint market monitoring meeting at the government complex in Seoul, attended by Bank of Korea governor Shin Hyun-song, Financial Services Commission chairman Lee Eok-won and Financial Supervisory Service governor Lee Chan-jin. Participants expressed concern over the rapid increase in borrowing-backed stock purchases, particularly margin loans, and agreed to strengthen regular monitoring through market review meetings while enhancing preemptive risk management and investor protection measures. The warning comes as margin lending has climbed to record levels. Outstanding margin loans rose from 27.3 trillion won at the end of last year to 38.0 trillion won as of June 1, an increase of more than 10 trillion won in five months. Signs of mounting stress have also emerged in forced liquidations of leveraged positions. Data from the Korea Financial Investment Association showed that forced sales totaled 707.7 billion won during May, while the ratio of forced liquidations to unpaid trading balances averaged 2.63 percent during the month and surged to 7.6 percent on May 20. On June 1 alone, forced liquidations reached 33.2 billion won, more than double the previous trading day's 15.4 billion won, with the ratio jumping to 2.5 percent from 1.2 percent. The concerns echoed Shin's warning last week that excessive leverage could turn market corrections into self-reinforcing selloffs through forced liquidations, distorting the normal relationship between prices and demand. Participants said favorable economic conditions, including a 53.2 percent year-on-year jump in May exports, have helped sustain the stock market rally. They also noted that Korea's stock market capitalization has overtaken India to become the world's sixth largest. According to Bloomberg data, the U.S. ranked first with a market capitalization of US$79.5 trillion, followed by China with $15.1 trillion, Japan with $8.6 trillion, Hong Kong with $7.2 trillion, Taiwan with $5.2 trillion and Korea with $5.0 trillion. India ranked seventh with $4.8 trillion. Officials also discussed recent volatility in the foreign-exchange market. Despite a record current-account surplus, they said the won has remained vulnerable to the Middle East conflict and continued foreign selling of domestic equities. They noted that the sharp rise in local share prices has prompted foreign investors to rebalance portfolios and lock in profits, adding to exchange-rate volatility. Foreign investors' holdings of Korean stocks have risen to 2,991 trillion won, accounting for 38.3 percent of total market capitalization, up from 1,312 trillion won and 32.9 percent at the end of last year. Net foreign selling of local equities has reached 127 trillion won so far this year, including 66 trillion won over the past 18 consecutive trading sessions. Koo said authorities are closely watching markets with a high level of vigilance to prevent anxiety from spreading amid elevated external uncertainty. He also stressed that the government would take immediate action if excessive one-sided movements emerge. Officials also agreed to closely monitor the bond market, where government bond yields have become more volatile amid global rate movements, inflation concerns and stronger expectations for domestic rate hikes. They said authorities would coordinate responses in a timely manner if excessive volatility emerges. 2026-06-04 12:48:40
South Korea's FX reserves decline in May after brief rebound SEOUL, June 4 (AJP) - South Korea's foreign exchange reserves declined in May, reversing a brief one-month rebound. According to the Bank of Korea on Thursday, South Korea's foreign exchange reserves stood at $426.99 billion at the end of May, down $880 million from the previous month. The drop came after authorities implemented market stabilization measures including a foreign exchange swap with the National Pension Service (NPS), which reduced the country's dollar holdings amid a weaker won and rising long-term interest rates. In April, foreign exchange reserves rebounded by $4.22 billion as gains in the dollar value of non-dollar assets and stronger investment returns more than offset the impact of market stabilization measures. But in May, those measures became the main factor behind the decline, reversing the previous month's recovery. The latest decline came after reserves increased by $1.72 billion in February, dropped by $3.97 billion in March and then rebounded in April. Market volatility intensified in May. After briefly stabilizing in the 1,400 won range against the dollar in early May, the won weakened beyond 1,500 per dollar later in the month, prompting continued policy intervention. The average won-dollar exchange rate rose to 1,491.39 won in May from 1,486.72 won in April, while the average yield on South Korea's benchmark 10-year government bond climbed 34.7 basis points to 4.080 percent from 3.733 percent over the same period. While the stock market extended its gains, foreign capital outflows persisted. Foreign investors net sold 44.71 trillion won worth of KOSPI-listed shares between May 1 and 29, weighing on the won even as the broader equity market rallied. Despite the stock market rally, foreign equity outflows, a weaker won and rising long-term bond yields added to pressure in the foreign exchange market. Foreign securities fell by $3.39 billion to $380.68 billion, accounting for 89.2 percent of total reserves, while deposits rose by $2.59 billion to $21.35 billion or 5 percent of the total. Special Drawing Rights (SDRs) allocated by the International Monetary Fund (IMF) edged down by $30 million to $15.78 billion, while South Korea's reserve holdings at the IMF fell by $60 million to $4.4 billion. Gold holdings remained unchanged at $4.79 billion, accounting for 1.1 percent of total reserves. Monthly fluctuations in FX reserves are typically driven by changes in the dollar value of non-dollar assets, investment returns and market stabilization measures. The swings seen in recent months reflect a combination of exchange rate movements and policy intervention. Meanwhile, South Korea maintained its position as the world's 12th-largest holder of foreign exchange reserves as of the end of April with 427.9 billion. China topped the list with $3.41 trillion, followed by Japan with $1.38 trillion. 2026-06-04 09:02:22
Shin's BOK signals active central bank intervention, putting monetary tightening and CBDC in spotlight SEOUL, June 02 (AJP) - The Bank of Korea (BOK) International Conference themed "Central Banks and the Future of Money," which ran from Monday to Tuesday, served as less of a purely academic event and more of a debut public stage highlighting the long-term vision of BOK Governor Shin Hyun-song. The central bank positioned staunch advocates of price and financial stability at the forefront while pitching a future monetary order centered around central bank digital currencies (CBDCs) as its core agenda. Since Governor Shin took office, the BOK’s strategic policy color has crystallized into three pillars: a hawkish monetary policy stance that dampens expectations for premature interest rate cuts; a macrofinancial stability framework that elevates financial vulnerability into a core variable for monetary policy decisions; and institutional restructuring aimed at redesigning the central bank’s payment and settlement infrastructure through CBDCs and tokenized deposits to fit the evolving digital economy. The lineup of participants at this year's conference directly mirrored these institutional priorities. Keynote speaker Isabel Schnabel, an Executive Board member of the European Central Bank (ECB), is recognized as a prominent inflation hawk in Europe. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, is also a figure who has consistently championed price stability and a highly cautious approach to rate cuts. Tobias Adrian, financial counsellor of the International Monetary Fund (IMF), addressed the critical linkages between financial vulnerability and monetary policy, while Princeton University Professor Markus Brunnermeier presented the policy dilemmas that digital currency creates among payments, credit, and privacy. Ultimately, the event merged a hawkish central banking philosophy emphasizing price and financial stability with a public payment infrastructure theory centered on CBDCs. This aligns closely with Governor Shin’s core philosophy, developed during his tenure at the Bank for International Settlements (BIS). Shin has long maintained a macrofinancial perspective, arguing that monetary policy should not be viewed merely as adjustments to the benchmark interest rate, but rather as an interplay where institutional leverage, asset prices, exchange rates, payment infrastructures, and global liquidity flows can collectively disrupt economic stability. It is hardly a coincidence that Adrian's paper on financial vulnerability—which posits that while easing financial conditions may support the economy in the short term, it exacerbates leverage and risk-taking over time, fueling deeper recession risks—was placed in the very first general session. This reflects Shin’s recent warnings against a simultaneous buildup in household debt, real estate, equity leverage, and lopsided foreign exchange movements. The message is clear: the era when monetary policy focused solely on inflation and growth is over; financial vulnerability must now be factored in. The CBDC discussions follow a similar logic. Participants, including Governor Shin, stressed that as stablecoins and big tech payment networks proliferate, central banks can no longer remain institutions that merely manage physical cash and bank reserves. If private digital currencies capture payment grids, the transmission channels of monetary policy, the commercial bank deposit base, and the broader financial stability architecture could all be destabilized. This concern was echoed by Executive Board Member Schnabel, who drew parallels between stablecoins and Money Market Funds (MMFs) to warn against financial stability risks. "Central banks cannot remain passive observers of these developments," Schnabel said. "The appropriate response is therefore not to resist innovation but to ensure that it develops within a framework that preserves stability, monetary control and trust in the currency." Professor Robert Townsend’s evaluation of this approach as a benchmark case study for central bank digital currency innovation underscores that the BOK under Shin aims to act as an architect, rather than a passive observer, of global payment debates. There were voices of caution, such as Professor Brunnermeier, who emphasized that CBDC is not simply a "nice-to-have technology." He highlighted a "triple dilemma" where boosting payment efficiency could weaken credit supply; strengthening credit supply could erode privacy; and enhancing privacy could hinder transaction tracking and loan enforcement, thereby impairing financial intermediation. Environmental shifts notwithstanding, the BOK continues its aggressive experiments with CBDCs, tokenized deposits, and cross-border payment infrastructures through Project Hangang and Project Agora. Initiated under former Governor Rhee Chang-yong, Phase 1 of the Bank of Korea’s flagship digital currency pilot, Project Hangang, ran from October 2023 to August 2025 to test the real-world viability of wholesale CBDCs and commercial bank deposit tokens. Phase 2, launched in March 2026, expands this scope to peer-to-peer transfers and programmable features, aiming to establish a next-generation public settlement infrastructure that integrates deposit tokens, government treasury execution, and private digital asset transactions. Such blueprints, however, will inevitably clash head-on with ongoing legislative debates over stablecoins. Once private stablecoins enter institutional frameworks, the central bank will need to re-demarcate the roles assigned to commercial bank deposit tokens and its own central-bank-led digital currency infrastructure. Ultimately, the trajectory of the BOK under the Shin administration points toward a "central-bank-led monetary order." It sends a dual signal: the central bank will design public infrastructure and regulatory frameworks ahead of the private sector, while refusing to ease its tight monetary stance until both inflation and financial vulnerabilities are firmly brought under control. Market participants who previously focused solely on interest rate decisions must now navigate a new landscape, tracking how the BOK scales its CBDC pilots, which public and private settlement networks it connects to deposit tokens, and what regulatory principles it establishes for private digital currencies. 2026-06-02 16:37:43
UPDATE: Korea's May inflation hits 26-mo high, hastening hike agenda *Updated with additional information and market response. SEOUL, June 02 (AJP) - South Korea's inflation accelerated by the fastest pace in 26 months to run above 3 percent in May as energy shocks from prolonged Gulf conflicts pushed up prices from fueling to service charges coupled with crisis-level exchange rate to rock capital markets and send the central bank scrambling for emergency actions. The composite consumer price index for May rose 3.1 percent from a year earlier, according to the Ministry of Data and Statistics on Tuesday. The annual inflation rate accelerated from 2.6 percent in April and marked the fastest pace since March 2024. Petroleum products were the main driver of the May pickup, rising 24.2 percent on year. Diesel prices jumped 33.3 percent, while gasoline climbed 23.1 percent. In May, the average retail price of gasoline at gas stations in Seoul stood at 2,051.1 won ($1.38) per liter, while diesel recorded 2,038.85 won per liter. The figures represent expansions of 1.46 percent and 1.66 percent, respectively, compared to April's averages of 2,021.6 won and 2,005.46 won when government capped the gains. The impact was most visible in transport costs, which rose 11.6 percent from a year earlier. Recreation and entertaining prices also increased 5.0 percent, while miscellaneous goods and services rose 4.1 percent. An index measuring the prices of daily necessities rose 3.3 percent, the highest level since April 2024, suggesting that households continued to feel the pressure of rising prices. The burden was concentrated more in non-food items, as the non-food component of the living necessities index climbed 4.2 percent while non-food items showed a rather modest rise of 2.1 percent. Fresh food prices, by contrast, fell 1.4 percent from a year earlier, with fresh vegetables and fresh fruit declining 4.9 percent and 2.8 percent, respectively. Agricultural, livestock and fishery products still rose 2.2 percent overall, as livestock and fishery prices increased despite relatively stable agricultural prices. Service prices rose 2.8 percent from a year earlier, led by travel-related items such as domestic and international airfares. Personal services increased 3.7 percent, while personal services excluding dining out climbed 4.4 percent. As of the end of the morning session, the three-year government bond yield rose 3.3 basis points to 3.823 percent, while the 10-year yield edged down 0.7 basis points to 4.167 percent. The longer-dated yields remained largely flat, benefiting from the spillover effects of a 3 trillion won auction for 30-year government bonds scheduled for the day. The benchmark KOSPI fell more than 2 percent while the dollar spiked above 1,518 won. The core inflation measure used by the Organization for Economic Cooperation and Development, which excludes food and energy, rose 2.5 percent, up from 2.2 percent in April. Another core gauge that excludes agricultural products and petroleum products also increased 2.5 percent. The Bank of Korea also held an inflation review meeting Tuesday morning, chaired by Lee Ji-ho, Head of Research Department, to assess recent price conditions and the outlook. The Bank of Korea in late May held the benchmark at 2.5 percent, unchanged for a full year, while clearly indicating rates would go higher possibly through multiple hikes depending on the inflationary trajectory. The next meeting is in July, but the monetary policy board can hold emergency rate-setting meetings. Lee said May inflation rose sharply from April as the pace of petroleum price increases widened and service price growth picked up, particularly in travel-related services such as domestic and international airfares. The central bank said most major categories acted as upward factors in May, with services, agricultural, livestock and fishery products, and petroleum products all contributing to the acceleration in headline inflation. The BOK also warned that inflation is likely to remain around 3 percent as the impact of oil price shocks gradually spreads to other sectors. Last month, it upped this year's inflation forecast to near 3 percent. "Uncertainty remains high over the future inflation path, depending on developments in the Middle East and the resulting movement in oil prices," Lee said. "As oil price shocks are gradually spreading to other sectors, inflation is expected to remain in the 3 percent range for the time being, and we will closely monitor price conditions with vigilance." The central bank also noted that the rise in living necessities prices to the low-to-mid 3 percent range has increased living cost burdens for vulnerable groups, whose spending is more heavily concentrated on essential goods. The latest inflation data came a day after BOK Governor Shin Hyun-song said Korea remains vulnerable to energy price shocks but has room to respond to renewed inflation pressure. "Korea is sensitive to energy price shocks, similar to the euro area," Shin said Monday during a policy dialogue at the 2026 BOK International Conference in Seoul. He added that there are fewer obstacles to adjusting monetary policy in relation to inflation, saying the central bank has "greater room for maneuver" to ease price pressures with potential rate hikes. 2026-06-02 12:23:22
Consumer prices hit 26-month high as fuel prices soar SEOUL, June 2 (AJP) - South Korea's consumer prices rose 3.1 percent in May from a year earlier, the Ministry of Statistics and Data said on Tuesday. Consumer prices, which serve as a key gauge of inflation, rose above 3 percent for the first time in 26 months since February 2024, fueled by sharp increases in petroleum and industrial product prices. An index measuring the prices of daily necessities also rose to 3.3 percent, the highest level since March 2024, suggesting that households continue to feel the pressure of rising prices. Petroleum products were a major driver of inflation, with prices rising 24.2 percent year-on-year. Diesel recorded the largest increase at 33.3 percent, while gasoline prices rose 23.1 percent. Costs in the service sector also rose 2.8 percent from a year earlier. Prices of agricultural and fishery products also climbed 2.2 percent as hot weather constrained supply. The core inflation measure used by the Organization for Economic Cooperation and Development (OECD), which excludes food and energy, rose 2.5 percent, marking its highest level since February 2024. 2026-06-02 10:44:31
South Korean bond yields surge on hawkish BOK remarks amid lingering Middle East conflict SEOUL, June 1 (AJP) - South Korean government bond yields surged following a double blow of U.S. President Donald Trump's rejection of a draft peace memorandum of understanding with Iran and hawkish remarks from the Bank of Korea (BOK) governor. The local currency, in contrast, erased early losses to close slightly higher as a clearer path toward interest rate hikes cushioned the market. The three-year government bond yield rose 5.9 basis points to 3.790 percent, its highest level since November 2023, while the 10-year yield jumped 10.6 basis points to 4.174 percent, returning to levels last seen in late May. Earlier in the morning, BOK Governor Shin Hyun-song emphasized during a policy dialogue at the BOK International Conference that South Korea's economic growth momentum remains robust, expanding the central bank's room to respond to inflation. The comments triggered a massive sell-off in the fixed-income market as investors interpreted the remarks as a clear signal for upcoming rate hikes. "The growth is very strong here in Korea," Shin said. "First-quarter growth is super strong, especially when measured in terms of gross domestic income rather than gross domestic product." "It poses fewer impediments to adjusting monetary policy in light of inflation," Shin said, adding that it gives the central bank a lot more leeway to conduct monetary policy. The upward trajectory of bond yields was already anticipated, as optimism for peace dimmed after President Trump announced on Sunday that he would not sign the draft peace memorandum with Iran. South Korea, which relies on the Strait of Hormuz for nearly 70 percent of its total crude oil imports, suffered a heavier blow than other major economies; this geopolitical friction, compounded by the BOK governor's hawkish rhetoric, sent bond prices tumbling. Conversely, the local currency showed resilient strength, defying expectations of a synchronized drop. The won opened down 0.8 won at 1,508.8 won per dollar and breached the 1,510 mark intraday, but steadily recovered after the conclusion of the conference's morning session to close up 3.6 won at 1,504.3 won per dollar. Rate hike expectations following Shin's remarks were fully priced into the market, effectively offsetting the headwinds stemming from the uncertainties in the Strait of Hormuz. "The central bank's tightening stance appears to be supporting the local currency," a foreign exchange market official said on the condition of anonymity. 2026-06-01 17:34:47
South Korea to launch 24-hour FX trading amid concerns over won stability SEOUL, June 1 (AJP) - As authorities prepare to open South Korea's foreign exchange market full-time on weekdays, expectations are growing that the move could partially ease exchange rate volatility. Experts, however, say longer trading hours alone cannot stabilize the won unless trading volume and global trust in the currency also improve. That came after revisions to the foreign exchange market code of conduct were approved last Friday, paving the way for expanded U.S. dollar–won trading hours from July 6. The current trading hours of 9:00 a.m. to 2:00 a.m. the following day will expand to run from Monday at 7:00 a.m. to Saturday at 7:00 a.m. New York time. During daylight saving time, trading will run from Monday at 6:00 a.m. to Saturday at 6:00 a.m., effectively allowing weekday round-the-clock trading. Foreign exchange authorities also plan to revise related systems, including the methodology for calculating the daily baseline brokerage rate. The current baseline rate is calculated from transactions between 9:00 a.m. and 3:30 p.m., but the full-day trading structure requires changes to intra-day posted rates and the calculation of opening, high and low rates. The measure extends the government's broader roadmap to improve the structure of South Korea’s foreign exchange market. In July last year, authorities extended the Seoul market’s trading hours to 9:00 a.m. to 2:00 a.m. the following day — 10 hours and 30 minutes longer than the previous 9:00 a.m. to 3:30 p.m. session — before moving toward a full 24-hour system covering New York trading hours. Market participants expect the longer hours to reduce "trading vacuums" and ease exchange rate volatility. Previously, major risk events such as U.S. employment data or Federal Reserve remarks were often absorbed all at once at the next morning's opening, creating sharp gap risks. Kang Hyun-ju, a senior research fellow at the Korea Capital Market Institute, said volatility in the overnight onshore market did not rise significantly after the initial extension of trading hours in July 2024, compared with the offshore non-deliverable forward market in New York. "The stabilization did not occur simply because the hours during which the market was closed overnight were reduced," Kang noted. "Instead, the extension allowed global overnight information to be continuously absorbed into the exchange rate, effectively minimizing the 'gap risk' of sharp fluctuations the following morning," he explained. The shift is also expected to improve currency risk management for investors and companies. Foreign investors will be able to convert won regardless of Korean standard time, while domestic retail investors trading overseas equities can respond to U.S. market moves in real time. Import-export firms can also execute late-night settlements and hedging transactions more flexibly. However, around-the-clock access does not automatically guarantee lower volatility. Experts warn that if actual transaction volume remains thin during dawn hours, a "liquidity vacuum" could emerge and cause the exchange rate to swing even on small orders. "While this is a necessary direction from the perspective of internationalizing the won, managing the exchange rate will inevitably become more difficult than in the past," said Kim Jung-sik, a professor emeritus of economics at Yonsei University. "Countries like Japan can utilize 24-hour trading as a buffer because their currencies are already fully internationalized, but South Korea does not yet possess that cushion." The won's limited role as a global reserve currency remains a structural hurdle. Even if offshore access improves, insufficient commercial and hedging demand during overnight hours could leave the exchange rate overly sensitive to offshore orders or algorithmic trading. The limitations could become clearer during major external shocks. If geopolitical disruptions such as a blockade of the Strait of Hormuz push up oil prices, strengthen the dollar and fuel risk aversion, the dollar-won exchange rate could still move sharply even under a 24-hour system. The dollar-won exchange rate weakened 1.4 percent from 1,471.00 won per dollar on February 27 to a monthly average of 1,491.39 won in May. On a monthly average basis, this marked the third-highest level in history, trailing only January and February of 1998 immediately after the Asian financial crisis. "If the blockade of the Strait of Hormuz extends past June, crude oil prices will climb to at least 130 dollars per barrel," said Park Sang-hyun, a research fellow at iM Securities. "In a worst-case scenario, the exchange rate could plunge to the 1,550 to 1,600 won level," he projected. The burden on financial authorities will also increase. Under the previous structure, authorities focused mainly on Seoul’s regular trading hours, but the new system will require continuous monitoring through the European and New York sessions into the Korean dawn. Experts and market insiders say the long-term focus should be on expanding infrastructure and broadening the underlying user base of the won. "The transition to 24-hour trading is not a policy designed to directly lower the exchange rate, but rather an infrastructural overhaul to ensure uninterrupted price formation," said an foreign exchange market official, on condition of anonymity. "For the system to stabilize, we must expand the base of domestic and foreign participants so that sufficient bid-ask spreads are maintained even at dawn, while simultaneously deepening the derivatives and hedging markets." On Monday, the exchange rate briefly dipped below 1,510 won per dollar after U.S. President Donald Trump rejected a proposed peace accord, but ultimately edged up 3.6 won to close at 1,504.3 won per dollar. 2026-06-01 16:40:01