BOK Governor Lee: 'View Exchange Rates Through Dollar Index'

A new perspective suggests that the recent high won-U.S. dollar exchange rate should not be viewed simply as a number (level) of 'so many won,' but rather by assessing the value of the Korean won against major currencies. Bank of Korea Governor Lee Chang-yong emphasized at his final Monetary Policy Committee press conference that this perspective holds more practical significance for economic policymaking.

Regarding the approximately 300-won surge in the won-dollar exchange rate from the 1200-won range at the start of his term, the Governor explained it was due to a 'strong dollar' phenomenon caused by the U.S.'s rapid interest rate hikes, rather than internal issues within the Korean economy. The Dollar Index measures the dollar's value against the currencies of six major countries. The Governor mentioned the won's trend, which has moved faster than the Dollar Index and shown vulnerability since the end of last year, and the increased volatility observed in the Korean and Japanese currencies, which have been classified as vulnerable currencies following recent Middle Eastern events.

Governor Lee stated he finds it difficult to agree with concerns that South Korea's aging population and declining productivity will lead to a weaker won. He added that comparisons with past crisis situations, such as the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis, are not advisable.

The Governor expressed regret that due to exchange rate volatility in the final period of his term, he could not hand over a stable situation to his successor. He dismissed criticisms regarding the foreign currency asset holdings of Shin Hyun-song, the nominee for the next governor and former Head of the Monetary and Economic Department at the Bank for International Settlements (BIS), as an 'excessive consideration,' and praised Mr. Shin as a 'true expert.'