BOK chief nominee shrugs off concerns over weakening won

Bank of Korea Gov. nominee Shin Hyun-song speaks to reporters on his way to the office in central Seoul, Tuesday. Yonhap

Bank of Korea (BOK) Gov. nominee Shin Hyun-song downplayed concerns over the weakening Korean won Tuesday, saying the exchange rate does not necessarily signal financial instability.

"The exchange rate level itself should not be given too much significance," Shin told reporters on his way to the office. "Rather, it reflects how much risk the financial system can absorb. In that sense, there is no major concern at this point."

"Unlike in the past, there is no need to directly link exchange rate movements with financial instability," he added.

The nominee's remarks come as the Korean currency has hovered around the 1,500 level against the U.S. dollar in recent trading days, pressured by foreign selling of domestic stocks amid the ongoing Middle East crisis.

Shin cited the Middle East conflict as the biggest near-term risk to the economy, warning that higher oil prices could fuel inflation while weighing on growth.

"Given the high level of uncertainty over how the situation will unfold in the Middle East, it is difficult to say more at this point," he said.

Hours after his remarks, the central bank issued a verbal intervention, saying it will take action if market sentiment and herd behavior cause excessive volatility.

"While we are not setting a specific target for the exchange rate, the pace of the recent rise has been unusually fast," Yoon Kyung-soo, director general of the central bank's international department, said during a briefing. "We are closely watching the situation."

On monetary policy, Shin rejected labels such as "hawk" or "dove," emphasizing flexibility. Some analysts have described him as a "pragmatic hawk," suggesting he could consider early rate hikes to contain inflation.

"It does not seem desirable to divide policy stance into hawkish or dovish," he said. "What matters more is to accurately assess the overall economic conditions and understand how the financial system would interact with the real economy, then respond flexibly depending on the situation."

He also said the government's planned 26.2 trillion won ($17 billion) supplementary budget aimed at cushioning the economic impact of the Middle East crisis would likely have a limited effect on inflation.

"The Middle East crisis is exacerbating difficulties in vulnerable sectors, underscoring the need for policy support," the nominee said. "Given the scale and measures announced so far, the inflationary impact appears limited."

Shin is set to succeed BOK Gov. Rhee Chang-yong, whose term ends April 20. He will undergo a parliamentary confirmation hearing, though the process is widely seen as a formality as his appointment does not require National Assembly approval.