SEOUL : South Korea's central bank warned on Thursday that an early shift in its monetary policy stance could pile more pressure on the local currency, a risk that needs to be properly addressed.
"Additional rate hikes by the U.S. Federal Reserve or an early shift in the domestic policy stance may increase downward pressure on the local currency," the Bank of Korea said in its quarterly monetary policy report submitted to parliament. The current policy interest rate of 3.50 per cent, the highest since late 2008, is at a restrictive level, slightly above the neutral range, the Bank of Korea said.
Volatility in the won has risen above its long-term average since early last year following the Fed's interest rate hikes and exceeded that of most other currencies since August by a significant degree, the report said.The won has weakened by 3 per cent against the U.S. dollar so far this year, following a 6 per cent drop in 2022, when the South Korean currency once touched its lowest level in 14 years. That compares with the U.S. Dollar index's gains of 0.4 per cent and 8.