Bank of Korea Governor Lee Chang-yong postponed a scheduled overseas trip and launched emergency measures after the won-dollar exchange rate surpassed 1,500 won during intraday trading.
According to the BOK on the 4th, Governor Lee was originally scheduled to depart that day to attend the Bank for International Settlements (BIS) governors' meeting in Basel, Switzerland. However, he decided to delay his trip and preside over a financial and foreign exchange situation review meeting domestically, given the expanded market volatility from the recent sharp rise in exchange rates.
Markets are closely watching whether the BOK will use the review meeting as an opportunity to express caution against excessive one-sided movements and signal its commitment to exchange rate stability.
"We determined that the situation needs to be closely monitored given the significant increase in foreign exchange market volatility," a BOK official said.
Governor Lee had originally planned to return on the 11th after attending the BIS governors' meeting and International Monetary Fund-related events. His schedule included attending board and Economic Consultative Committee meetings as a BIS director, as well as chairing a meeting as head of the Committee on the Global Financial System. A keynote speech at the IMF's "Asia 2050 Conference" in Bangkok, Thailand was also scheduled, but the surge in exchange rates made schedule adjustments unavoidable.
According to Seoul Money Brokerage Services, the won-dollar exchange rate soared to as high as 1,505.8 won during overnight trading on the 3rd—a sharp jump of 65.8 won from the previous day. This marks the first time the exchange rate has exceeded the 1,500 won level in approximately 17 years, since the global financial crisis in March 2009.
The New York non-deliverable forward closed at 1,477.5 won. Foreign exchange dealers believe the upper bound for the exchange rate should be kept open at 1,495 to 1,505 won, considering the possibility of continued net selling of stocks by foreigners in the KOSPI market. While dollar sales from exporters and heavy industry companies are expected to cap the upper range, the perception has spread that a return above 1,500 won is possible at any time, given the market has already experienced that level once.
Global dollar strength lies behind the recent surge in exchange rates. Safe-haven demand for dollars expanded as risk-off sentiment intensified following U.S. and Israeli attacks on Iran. The Dollar Index (DXY), which measures the dollar's value against six major currencies, rose from the 97 level to above 99.