Bank of Korea Governor Shin Hyun-song signaled that the won could strengthen further against the dollar, saying the currency remains weaker than in previous years even after the exchange rate fell to its lowest level in about two years.
Speaking at a parliamentary audit held by the National Assembly's Finance and Economic Planning Committee on the 12th, Shin responded to Rep. Moon Jin-seok of the Democratic Party of Korea, who said the government should find ways to lower the baseline exchange rate. "The exchange rate is in the 1,330 won range today, but it is still higher than in previous years," Shin said. "There is room for the won to strengthen further."
Shin credited interest rate increases for the currency's stabilization. "By raising rates twice in July and August this year, the exchange rate has stabilized considerably," he said. The central bank raised its policy rate in consecutive months in July and August, for a combined increase of 0.5 percentage points.
The won-dollar exchange rate fell to its lowest level in about two years that day. In the Seoul foreign exchange market, it closed at 1,335.1 won as of 3:30 p.m., down 7.7 won from the previous session, and slipped as far as 1,332.0 won around 3:45 p.m. Both levels were the lowest since Oct. 4, 2024.
Shin was more cautious, however, about whether currency swap lines guarantee a lower exchange rate. When Moon proposed a currency swap as a way to bring down the baseline rate, Shin said, "Even countries with standing currency swap arrangements tend to see their exchange rates fluctuate widely depending on financial market conditions."
In a report on its operations submitted the same day, the central bank said the won has strengthened more sharply than the currencies of other major economies since July, reversing its weakness in the first half of the year.