Summary:
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BOK hold was unanimous, Rhee says
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FX volatility driven by geopolitics and overseas investment
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AI-related foreign stock buying cited as key won drag
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Govt to announce on U.S. trade deal and FX market later
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Weak won can lift inflation but crisis risk seen low; “ample dollars” reassurance
Rhee Chang-yong said the Bank of Korea’s decision to keep its base rate unchanged was unanimous, underscoring broad agreement on the policy board even as officials remain increasingly focused on foreign-exchange volatility and capital-flow dynamics.
Speaking after Thursday’s decision, Rhee said policymakers need to stay cautious on FX volatility, attributing the won’s weakness to geopolitical risks and continued overseas investment by residents. He singled out domestic purchases of AI-related overseas stocks as a key driver, noting that the won’s weakening toward 1,470 per dollar earlier in January was also linked to heightened geopolitical concerns. He added that retail investors’ overseas stock buying is rising again, reinforcing the need to change expectations that the won will keep falling.
Rhee indicated that five board members expect rates to remain unchanged in the near term, while one member argued the door for a near-term cut should remain open, keeping some flexibility in the outlook. He also said higher interest rates alone are unlikely to calm property price upswings, suggesting the BOK does not see rate policy as a single-purpose lever for housing risks.
On FX coordination, Rhee thanked the welfare ministry and the National Pension Service for cooperating with FX authorities, and said the NPS has recently conducted hedging that helped stabilise the currency. He warned that temporary measures may be necessary to address FX volatility alongside longer-term solutions, and said Korea would not agree to sustained outflows of around $20 billion a year into U.S. investments if FX conditions were unstable.
Most notably, Rhee said the government will make an announcement later in the day on a U.S. trade deal and the FX market, a signal that put traders on alert for fresh policy messaging or measures designed to damp volatility.
In his latest remarks, Rhee said a weak won could add to inflationary pressures, but he downplayed systemic risk, arguing it is unlikely to trigger a financial crisis. He also stressed that South Korea has an ample supply of U.S. dollars, a reassurance aimed at anchoring confidence and limiting tail-risk pricing in the currency market
