SEOUL :Bank of Korea governor on Tuesday said interest rate differences with the United States are one of many factors affecting exchange rates and that recent won weakness was due to dollar strength rather than domestic rates being held last month.
“Foreign exchange rates are now more affected by changing views on how long dollar strength would continue than the interest gap with the United States,” Rhee Chang-yong said at a forum co-hosted by local broadcasters.
Rhee said it was too early to discuss rate cuts but that the central bank would start to consider them should the inflation rate fall toward 3 per cent near the end of this year, providing confidence that it is converging to the central bank’s 2 per cent target.
South Korea’s consumer inflation came in at 4.8 per cent in February, below expectations and at a 10-month low, bolstering views that the central bank is done with its current policy tightening cycle.
The BOK held interest rates last month, after a year of uninterrupted hikes, and said the monetary tightening campaign would not resume if inflation followed an expected path towards moderation.
The won has rebounded 1.8 per cent so far this month, after dropping by nearly 7 per cent against the dollar in February, the biggest monthly loss in more than 11 years.