BOK Governor Rhee Chang-yong Chairs Emergency FX Meeting: "This Time Is Different"

[The Financial News] As the won–dollar exchange rate climbed above 1,500 won, Bank of Korea Governor Rhee Chang-yong postponed a planned overseas trip and convened an emergency meeting to review conditions in the foreign-exchange market.
According to the Bank of Korea on the 4th, Governor Rhee presided over a meeting from 8:30 a.m. to assess financial and foreign-exchange conditions and monitor market developments. Participants discussed the reasons behind the sharp swings in the won–dollar rate in London and New York trading the previous day, and compared recent exchange-rate movements in Korea with those in major economies.
Rhee had originally planned to depart this morning for Basel, Switzerland, to attend meetings including the Bank for International Settlements (BIS) governors’ meeting. However, in after-hours trading (3:30 p.m. to 2:00 a.m. Korea time), the won–dollar rate broke above the 1,500-won level in the early hours of the day, surging to as high as 1,505.8 won. As the head of the foreign-exchange authorities, he was seen as needing to respond to the situation, and his flight was pushed back to the afternoon.
The last time the won–dollar exchange rate moved into the 1,500-won range was on March 10, 2009, during the global financial crisis, when it closed at 1,511.50 won. Late last year, the rate briefly rose above 1,480 won, but the Bank of Korea and the Ministry of Finance and Economy stepped in with verbal interventions and actual market operations, including dollar selling, to cap further gains.
The latest spike in the exchange rate is widely attributed to the United States and Israel launching a surprise strike on Iran, which prompted investors to flock to the dollar, the quintessential safe-haven asset. At the same time, concerns over a possible closure of the Strait of Hormuz pushed up international oil prices, weighing on the value of the Korean currency given the country’s heavy dependence on energy imports.
Even so, the Bank of Korea moved to head off excessive market anxiety. A BOK official explained, "Although the exchange rate briefly moved above 1,500 overnight, the current situation is different from the past: liquidity is ample, and Korea’s external borrowing spreads and credit default swap (CDS) premiums remain at stable levels."
Afterward, Governor Rhee will attend the Global Economy Meeting and the Meeting of Governors, and then, in his capacity as a BIS board member, he will take part in the board meeting and the Economic Consultative Committee. As chair of the Committee on the Global Financial System (CGFS), he is also scheduled to preside over discussions on key global financial issues.
On the 5th, he will deliver a keynote speech at the International Monetary Fund (IMF)’s "Asia in 2050 Conference" in Bangkok, Thailand. He is scheduled to return to Korea on the 11th after completing all his engagements.

taeil0808@fnnews.com Kim Tae-il Reporter