Won hits 7-month high, paving way for BOK rate cut
All eyes on BOK's Thursday meeting as policymakers weigh 0.25 percentage point cut
The Korean won climbed into the 1,360-won range on Monday, gaining value against the US dollar to reach a seven-month high at the opening quote. With the local currency strengthening, the Bank of Korea is expected to carry out a rate cut this week.
The won was quoted at 1,369 per dollar as the market opened Monday, strengthening by 2.5 won from the previous after-hours trading session. It marked the strongest opening value of the won against the dollar since October.
After briefly weakening to 1,371 won during early trading, the won reversed course and strengthened to 1,360.5 won per dollar — its strongest intraday level since reaching 1,355.9 won on Oct. 15. As of 2 p.m., the won was trading at 1,363.45 per dollar.
In recent weeks, the won has been gaining momentum as markets anticipate that Korean foreign exchange authorities may allow its appreciation as part of broader trade talks with the US.
Between May 16 and 23, the won appreciated by 2.45 percent in terms of after-hours closing prices, making it the second-strongest-performing currency among major economies during that period. The Swedish krona posted the largest gain, rising 2.51 percent.
While a news report in local The Korea Economic Daily Wednesday suggested that the US had requested Korea to implement measures to strengthen the won as part of trade talks, Korean forex authorities denied the claim.
'The two countries share a mutual understanding on the principles of forex market operations and exchange rate policies and are discussing a range of negotiation agendas,' the Finance Ministry said Thursday.
'Nothing has been specifically decided at this stage, and discussions are still ongoing.'
Meanwhile, the won's recent appreciation provides the Bank of Korea with more room to cut its base rate by 0.25 percentage point, which currently stands at 2.75 percent. The central bank has been under pressure to ease monetary policy to support the economy, which contracted by 0.2 percent in the first quarter of this year.
While BOK Governor Rhee Chang-yong has previously cited currency volatility as a key concern, the recent strengthening of the won could ease that pressure and open the path to a rate cut.
'With strong downward pressure on the economy, the BOK is likely to leave the door open for further rate reductions even after implementing a cut this week,' said Ahn Ye-ha, an analyst at Kiwoom Securities.
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