Foreign Exchange Authorities: "Exchange Rate Deviates from Fundamentals, Volatility Remains High"

Market Situation Review Meeting Held

On January 8, the heads of the financial and foreign exchange authorities stated that the current exchange rate is deviating from economic fundamentals and emphasized their commitment to maintaining firm and consistent policy efforts.

Deputy Prime Minister and Minister of Economy and Finance Koo Yooncheol held a market situation review meeting that morning with Bank of Korea Governor Lee Changyong, Financial Supervisory Service Governor Lee Chanjin, and Financial Services Commission Vice Chairman Kwon Daeyoung to assess trends in the financial markets.

The participants agreed that "while some of the one-sided expectations for a weaker won have eased since the end of last year, the foreign exchange market still shows high volatility." They also shared the view that "since the current exchange rate is disconnected from fundamentals, it is important for the authorities to continue firm and consistent policy efforts," and decided to swiftly implement follow-up measures.

On this day, the won-dollar exchange rate in the Seoul foreign exchange market opened at 1,449.7 won, up 3.9 won from the previous session, fluctuating just below the 1,450 level.

Regarding the financial markets, the participants assessed that "the recent stock market has become more active due to inflows of foreign investment capital, and government bond yields have remained stable, indicating overall stability."

Deputy Prime Minister Koo announced plans to fully implement productive finance by redirecting capital flows toward advanced industries, venture startups, and the capital market to support a rebound in the potential growth rate. To this end, the government will launch a National Growth Fund totaling 30 trillion won this year and introduce a 600 billion won National Participation Fund.

Additionally, the government will expedite measures to promote long-term investment in domestic stocks, such as launching the domestic stock return account (RIA) product as soon as possible. Koo also mentioned that the government will ensure the smooth inclusion of Korea in the World Government Bond Index (WGBI) scheduled for April and actively pursue inclusion in the MSCI Developed Markets Index.

Deputy Prime Minister Koo added, "Given the persistent risk factors such as geopolitical uncertainties and major countries' monetary policies, each institution should continue to operate a 24-hour monitoring system, closely observing external conditions including the international financial markets, with the market situation review meeting at the center."