The Bank of Korea is tracking heightened exchange rate volatility after the won posted its strongest quarterly performance since 1998, supported by massive tech export revenues. However, board member Hwang Kunil cautioned that this strength masks an uneven recovery, as small and medium-sized enterprises borrow primarily to cover wages and operating expenses rather than to invest. Meanwhile, the central bank is balancing these structural domestic weaknesses against energy-driven inflation risks that may keep consumer price growth above the official target well into next year.
Key points
The Bank of Korea paused monetary tightening at 3.00 percent, though potential energy-dri…: The Bank of Korea paused monetary tightening at 3.00 percent, though potential energy-driven inflation risks leave open the possibility of future rate hikes.
Economic momentum remains distinctly split, as lagging private consumption and rising del…: Economic momentum remains distinctly split, as lagging private consumption and rising delinquency rates weigh heavily on small and medium-sized enterprises.
Policymakers anticipate consumer price inflation will near the 2.0 percent target late in…: Policymakers anticipate consumer price inflation will near the 2.0 percent target late in the first half of 2027 before stabilizing completely around early 2028.
Sources checked by our analysis pipeline: 1
SEOUL, Oct 29 : A voting member on the Bank of Korea's board warned that the recent pace of the won's moves warranted close monitoring, signalling caution over the currency even as the export-reliant economy benefits from booming demand for AI chips.
"With the exchange rate, you have to look at volatility and the speed of its moves rather than the level," Hwang Kunil said in an interview with Reuters. "The pace of the recent move has been somewhat faster than expected. We are watching volatility closely."
"That said, once the massive current account surplus and foreign investment rebalancing are adjusted, downward pressure on the exchange rate remains valid."
Hwang, a former deputy finance minister and World Bank executive director, said the won's recent gains came as surging dollar inflows from the global artificial intelligence buildout fuelled demand for specialised memory chips from top Korean chipmakers SK Hynix and Samsung Electronics.
Hwang is viewed by analysts as one of the most dovish members of the central bank's seven-member board. He opposed August's quarter-point hike in interest rates, which highlighted a…
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