KRW: Policy easing under consideration - BNY

FXStreet Insights Team FXStreet

BNY’s Head of Markets Macro Strategy Bob Savage notes that the Bank of Korea (BoK) may consider policy easing as Middle East geopolitical shocks threaten domestic growth. Savage highlights that the new BoK governor is prioritizing market stability and signaling a relaxed stance toward South Korean Won (KRW) weakness. Simultaneously, South Korean President Lee Jae Myung is exploring emergency economic measures to counter the ongoing energy crisis.

BoK signals tolerance for KRW weakness

"South Korean President Lee Jae Myung today instructed senior officials to take bold measures to address concerns over the energy situation caused by the war in the Middle East, saying the government may issue an emergency economic decree if necessary."

"He downplayed FX risks, citing ample USD liquidity, and signaled tolerance for KRW weakness, noting that exchange rate levels are not a concern if markets can absorb the adjustment."

"He declared that “policy easing may be necessary as the Middle East situation adds to economic difficulties,” noting that the inflationary impact of the envisioned extra budget would likely be limited at its current scale and design."

"The foreign equity outflows and relaxed response to KRW weakness make it harder for investors to buy into the bond narrative as the focus shifts to oil shocks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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