Shin Hyun-sung, Governor of the Bank of Korea, recently assessed that the won has developed resilience against external shocks and can withstand various types of crises.
According to Yonhap News on August 30, Shin made these remarks during a meeting with reporters on August 28 (local time) at the Jackson Hole Symposium in Wyoming, USA. This was his first attendance at the Jackson Hole meeting in his capacity as BOK governor. He noted that the BOK's proactive interest rate hikes have positioned the currency well, stating, "The exchange rate is relatively stable, and we are well-prepared for any type of shock that may arise."
Shin evaluated that the won has a certain level of immunity. Despite an increase in the dollar index, which measures the dollar's value against six major currencies, the won/dollar exchange rate has shown a downward trend. On August 28, the exchange rate closed at 1,372.5 won per dollar in the Seoul foreign exchange market, marking the lowest closing price in 13 months since July 24 of the previous year, when it was 1,367.2 won.
He emphasized that the exchange rate is not merely a relative price reflecting trade conditions but has become a comprehensive indicator. "In Korea, the exchange rate is particularly important," he said, adding that it symbolizes the trust in the monetary system. He indicated that the BOK will play a crucial role in stabilizing the foreign exchange market.
Short-term factors contributing to the decline of the won/dollar exchange rate include the listing of SK Hynix's American Depositary Receipts (ADRs) and increased dollar sales by exporting companies.
When asked whether the $20 billion annual investment commitment to the U.S. would pressure the won/dollar exchange rate, Shin expressed confidence that it could be managed. He also assessed that the current foreign exchange reserves, which stood at $427 billion last month, would be sufficient to support this investment.
He noted, "According to the memorandum of understanding (MOU), we agreed to invest up to $20 billion annually in the U.S., but if our situation does not allow, we may invest less or not at all."
Regarding the speech by Federal Reserve Chair Kevin Warsh, which was discussed at the Jackson Hole meeting, Shin provided an in-depth interpretation. He explained that Warsh's previous reluctance to speak was due to the issue of excessive communication by central banks distorting market price discovery, a concern he shares. He added, "Warsh's speech included elements that the market has been seeking, providing a broader perspective, which has significant implications for the upcoming September Federal Open Market Committee (FOMC) meeting."
* This article has been translated by AI.
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