BOK board member flags faster-than-expected won moves, signals caution on currency speed

SEOUL, Oct 29 (The Wiregazette) – A voting member of the Bank of Korea’s seven-member board said the pace of the won’s recent moves deserves close monitoring, a cautionary note from a dovish policymaker amid a record-breaking rally driven by artificial-intelligence chip exports.

“With the exchange rate, you have to look at volatility and the speed of its moves rather than the level,” Hwang Kunil said in an interview with Reuters. “The pace of the recent move has been somewhat faster than expected. We are watching volatility closely.”

Hwang, a former deputy finance minister and World Bank executive director, added that once the nation’s massive current-account surplus and foreign investment rebalancing are adjusted, “downward pressure on the exchange rate remains valid.”

The won strengthened about 13% against the U.S. dollar in the third quarter, the sharpest quarterly gain since the fourth quarter of 1998. The rally has been driven by surging dollar inflows from the global AI buildout, which has boosted demand for specialized memory chips from South Korea’s top chipmakers, SK Hynix and Samsung Electronics.

**Dovish stance on rates**

Hwang is viewed by analysts as one of the most dovish members of the central bank’s board. He opposed a quarter-point rate hike in August, a decision that highlighted an internal debate over how far tightening should go.

The Bank of Korea held its benchmark rate steady at 3.00% this month, following back-to-back increases in July and August, but left further tightening on the table amid inflation risks tied to energy prices and a resilient economic recovery.

**Inflation trajectory**

On the domestic price outlook, Hwang projected that headline consumer price inflation would start approaching the central bank’s 2.0% target toward the end of the first half of 2027. He expects inflation to be fully stabilized at the target by the end of next year or early 2028.

“What we need to focus on right now is, of course, the trajectory of inflation,” he said.

**Uneven growth, weak domestic demand**

While Hwang expects export momentum to remain strong for the time being, he expressed concern that economic benefits are not being distributed evenly.

Private consumption is recovering at a slower pace, while small and medium-sized companies face elevated delinquency rates and weak domestic demand, he said.

“The positives are limited to certain groups, while high rates and prices affect everyone,” Hwang said. “It depends on which side proves to be stronger.”

He also cautioned about the underlying quality of corporate financing for smaller businesses. Their delinquency rates are climbing, and much of their borrowing goes to cover immediate operating costs such as wages and raw materials rather than expanding capital investment.

**AI spending risks and surplus outlook**

Asked whether a slowdown in global AI spending could hurt export-led growth, Hwang said this year’s current-account surplus could be revised up to nearly $500 billion from the Bank of Korea’s August forecast of $450 billion.

A shortfall of about a tenth of that, or roughly $50 billion, would “of course” be a blow, he said, citing an earlier Bank of Korea projection on the potential implications of a slowdown.

“But this boom is likely to last somewhat longer,” he added.

The interview was Hwang’s first since joining the board in February 2024 and the first time he detailed monetary policy trade-offs amid Asia’s fourth-largest economy’s large current-account surplus. A veteran financial diplomat, Hwang managed South Korea’s currency policy during U.S. President Donald Trump’s first term, when Washington accused Seoul of engineering excessive current-account surpluses.