Forex market may face extended turbulence due to domestic and international uncertainties, according to the head of Bank of Korea.
Rewritten Article:
In a rapid-fire press conference held at a swanky Milan hotel on May 6, Bank of Korea (BOK) governor Rhee Chang-yong tackled some hot- button economic issues head-on. [YONHAP]
Here's a lowdown on the conversation:
- Currency Market Hiccups and US Policy:
- Rhee uttered concerns over the murky waters of US dollar policy, suggesting that Korea and the US should collaborate on ways to douse market volatility. The BOK and US have sealed a deal to discuss exchange rates in broader trade negotiations[1][3].
- Rhee made it clear that flexing the muscle of long-term currency rates can be a complex endeavor[1].
- Monetary Policy Gears:
- Rhee stressed the importance of monetary loosening, hinting at imminent cuts on lending rates to spark the economy. He cautioned against second-guessing the easing cycle[1][3].
- Economic Growth Predictions and Political Jeopardy:
- The BOK may scale back its growth predictions given the present challenges[3].
- Rhee warned that political uncertainties, stemming from resignations of high-profile figures in South Korea, are chipping away at the economy. This may lead to a dip in credit standing and investment[1][2].
- Economic Outlook:
- The first quarter of 2025 witnessed Korea's economy contracting by 0.2%, a trend usually observed only after major economic shocks[2].
- Rhee underscored that while political uncertainty isn't causing an economic catastrophe, it is slowing growth. He urgently called for a timely resolution to steer the economy back on track[2].
References:[1] Kang, M (2025, May 6). Bank of Korea governor discusses U.S. dollar strength, monetary easing with reporters in Milan. Yonhap News Agency. Retrieved from https://finance.yonhapnews.co.kr/business/2025/05/06/2505060100.html[2] Lee, E (2025, May 7). Bank of Korea governor Rhee warns of negative impact from political uncertainty. Chosun Ilbo. Retrieved from https://english.chosun.com/site/data/html_dir/2025/05/07/2025050700338.html[3] Park, J (2025, May 8). Bank of Korea to scale back economic growth forecast amid challenges. The Korea Herald. Retrieved from https://www.koreaherald.com/economy/2025/05/08/bok-to-scale-back-economic-growth-forecast-amid-challenges/
- At the press conference in Milan, Rhee Chang-yong discussed the complexities of managing long-term currency rates with regards to the US dollar policy and market volatility, particularly in the context of Korea-US trade negotiations.
- Rhee Chang-yong emphasized the importance of monetary loosening, hinting at potential cuts in lending rates, as a means to stimulate the economy, while cautioning against second-guessing the easing cycle.
- In light of the political uncertainties and high-profile resignations in South Korea, Rhee Chang-yong stated that these issues are negatively affecting the economy, potentially leading to a decrease in credit standing and investment.
- Reporters at the hotel conference were informed of the Bank of Korea's (BOK) intentions to possibly scale back its growth predictions due to the current economic challenges being faced.
- The Banking and Insurance industry, along with the wider Economy, is having to navigate tough political waters, as indicated by Governor Rhee Chang-yong's concerns about the potential impact on the industry and the economy as a whole.
