The Bank of Korea’s governor told CNBC that the central bank will intervene to control currency fluctuations if necessary, calling recent market volatility a bit “excessive.”
Central Bank Governor Lee Chang-dy said external factors are driving economic growth wonmovement.
“I think the recent moves are a little bit overdone from what the market fundamentals sound like,” he told CNBC’s Karen Tso on the sidelines of the International Monetary Fund’s spring meetings in Washington on Tuesday.
Lee attributed the won’s weakness to a stronger U.S. dollar and geopolitical tensions in the Middle East.Weakness in other Asian currencies, such as the U.S. dollar yen and RMB This also affected the Korean won, he added.
The South Korean won strengthened to 1,382.6 won against the U.S. dollar on Wednesday, an increase of 1.26%, after hitting a 17-month low before breaking through the important mark of 1,400 won against the U.S. dollar on Tuesday.
stabilization measures
Li said the central bank was ready to “deploy stabilization measures” if market volatility persisted and had sufficient resources to do so.
“I’m not saying we will intervene heavily in every move. But I think basically we can deploy foreign exchange intervention,” he said, adding that the country had “other domestic agencies” and “many tools” they could deploy.
Bank of Korea Governor Lee Chang-hyeok at an event during the spring meetings of the International Monetary Fund (IMF) and the World Bank in Washington, the United States, Friday, April 14, 2023.
Bloomberg | Bloomberg | Getty Images
His remarks came as South Korean Finance Minister Choi Sang-mok met with Japanese Finance Minister Shunichi Suzuki on the sidelines of the G20 Finance Ministers and Central Bank Governors meeting in Washington, DC.
“Regarding developments in foreign exchange markets, the two ministers expressed serious concern about the recent sharp depreciation of the Japanese yen and South Korean won and expressed their intention to take appropriate action against excessive volatility.” Korea Ministry of Economy and Finance said in a statement.
sticky inflation
this Bank of Korea keeps benchmark interest rate unchanged It was 3.5% on Friday.
Li stressed that inflation challenges still exist.
“I think our problem is that, unlike the U.S. and Europe, we have higher headline inflation than core inflation,” he told CNBC. “Core inflation is slowing as expected, but headline inflation is quite high right now.” ”
He added that the central bank would not be ready to adjust interest rates until “we are confident” that inflation will converge to target levels.
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