Seoul, South Korea – The Bank of Korea (BOK) has pledged to take swift action to stabilize domestic financial and foreign exchange markets if volatility continues to escalate. The central bank’s announcement came after the U.S. Federal Reserve signaled a slower pace of interest rate cuts, causing the Korean won to depreciate to a 15-year low against the dollar.
In a meeting to assess the implications of the Federal Open Market Committee (FOMC) decision, Bank of Korea Deputy Governor Yoo Sang-dae expressed concerns about the prolonged uncertainties stemming from the new U.S. administration’s economic policies and geopolitical risks. While acknowledging that market volatility had subsided somewhat following the recent state of emergency, Yoo warned that a combination of external uncertainties and domestic political developments could trigger renewed instability.
The Fed’s decision to reduce its benchmark interest rate by 25 basis points marked the third consecutive rate cut since September. However, the central bank revised its dot plot, suggesting a less aggressive easing path than previously anticipated. The shift in monetary policy stance, coupled with concerns about potential inflation under the Trump administration, has strengthened the U.S. dollar and weakened other currencies, including the Korean won.
The won briefly surpassed the 1,450 won per dollar mark on Wednesday, a level not seen since the global financial crisis in 2009. While the currency had previously weakened in response to the state of emergency declared by South Korean President Yoon Suk-yeol, the recent depreciation reflects broader concerns about the global economic outlook.
The Bank of Korea attributed the market volatility to the Fed’s hawkish stance, as reflected in its upward revisions to economic growth and inflation forecasts. The increased uncertainty has led to a rise in U.S. Treasury yields, a decline in stock prices, and a strengthening of the greenback.
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