Bank of Korea Governor Shin Hyun-sung assessed that despite the recent decline in the won-dollar exchange rate, the value of the won remains lower than historical averages. He emphasized that a stronger won could reduce import prices and enhance household purchasing power.
During a press briefing following the monetary policy decision by the Bank's Monetary Policy Committee on October 22, he stated, "Whether looking at the won-dollar exchange rate or the effective exchange rate, the won is currently weaker compared to previous years."
He noted, "The very high exchange rate seen in early summer was exceptional and abnormal," explaining that the subsequent rapid decline in the exchange rate was a process of returning to a normal situation.
Shin pointed out that the long-term average of the effective exchange rate is around 101, while it was approximately 89 when the exchange rate was at 1,480 won. He indicated that the won can be considered significantly weaker based on the effective exchange rate, which measures the value of the won against the currencies of major trading partners, with higher numbers indicating a stronger won.
However, he clarified that it is not necessary for the won to recover to historical average levels. "Exchange rates can fluctuate above or below the long-term average depending on the situation," he explained.
Shin remarked that the downward trend in the exchange rate represents a correction from the won's previous weakness, stating, "While there are pros and cons to a stronger exchange rate, it clearly has the effect of suppressing import prices and enhancing household purchasing power, thereby alleviating polarization."
He added, "The exchange rate symbolizes trust in the economy, going beyond merely being a price variable that mediates trade. As a central bank, stabilizing the currency value is a crucial element, and we will strive to be a focal point of market confidence."
Meanwhile, he confirmed that the policy for the internationalization of the won is proceeding as planned. Shin stated, "The 24-hour won trading that began on July 1 is progressing well, and the offshore won settlement system that started trial operations on September 1 is functioning without issues."
The offshore won settlement system is set to officially launch in January 2027. Shin noted that there has been a slight increase in trading volume in the offshore market but added, "We will comprehensively assess the specific effects after actual operations begin."
* This article has been translated by AI.
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