BOK chief says won ‘clearly undervalued,’ sees room for correction

(Han Joo-hyung)

Bank of Korea Governor Rhee Chang-yong said the current won/dollar exchange rate is “clearly high by any measure” and has significant room to correct, while cautioning that authorities and investors should brace for potential shocks when a correction occurs.

Speaking to reporters Wednesday at the bank’s annex during the BOK–Naver joint AX conference, Lee said that “by any model, the current exchange rate is elevated and, given time—especially if expectations change—it is likely to adjust,” adding that “to anyone looking at it, there is ample room for correction.”

His remarks echoed comments earlier in the day by President Lee Jae-myung, who said at a New Year’s press conference that the won has been less undervalued than the yen and that authorities expect the rate to move back toward the 1,400-won-per-dollar range within a month or two.

Rhee said the current level reflects expectations that the won would continue to weaken, noting that such expectations formed over several months and could likewise unwind over time. “It may take months, but if expectations reverse, the exchange rate can come down,” he said.

He also stressed that the strong dollar phenomenon is not unique to South Korea. “Countries with substantial dollar investments are being affected,” he said, pointing to broader global factors behind the move.

At the same time, the governor voiced concern over latent risks tied to overseas investments. He warned that both the National Pension Service and individual investors have gone abroad with little or no currency hedging. “What worries me is the kind of shock that could come when an adjustment happens,” he said. “We don’t know exactly when the correction will occur, but we need to be well prepared for that moment.”

On Wednesday, the won closed at 1,466.37 per dollar.