Seoul: Shin Hyun-song, the nominee for governor of the Bank of Korea (BOK), stated there are no major concerns over the current level of the local currency, highlighting that dollar liquidity remains ample. Shin made these remarks as he began preparations for a parliamentary confirmation hearing, following his nomination last week to succeed the incumbent governor, Rhee Chang-yong, at the end of his four-year term next month.
According to Yonhap News Agency, Shin emphasized the importance of the market's ability to absorb related risks rather than focusing solely on the won-U.S. dollar exchange rate level. He noted that strong dollar liquidity diminishes the need to associate exchange rate movements with financial instability, which was often the case in the past.
The won has been close to the significant 1,500 won-per-dollar mark recently, dropping to as low as 1,517.3 last week due to escalating conflict involving Iran, raising global oil prices and fears of broader economic repercussions. On Tuesday, the currency opened at 1,519.9 won per dollar, its lowest in about 17 years. Shin identified the Middle East crisis and rising global oil prices as key economic risks and supported policy easing measures, such as a supplementary budget.
Shin remarked that policy easing might be necessary due to the economic challenges posed by the Middle East situation, adding that the inflationary impact of the proposed extra budget would likely be limited. The government is working on a 25 trillion-won (US$16.39 billion) supplementary budget to stabilize the economy amid the ongoing conflict, with the National Assembly expected to pass the bill by next Friday.
Regarding the monetary policy path, Shin advised caution, citing uncertainties about the Middle East situation's duration and impact. He also responded to market views labeling him as a hawk, suggesting that such binary labels are inappropriate. Shin emphasized the need to accurately assess economic conditions and understand the interaction between financial structures and the real economy, allowing for a flexible response based on the situation.
Shin, a former senior official at the Bank for International Settlements (BIS), is expected to undergo a parliamentary confirmation hearing, which is largely seen as a formality since his appointment does not require National Assembly approval.