BOK board member flags won volatility despite AI chip export boom - RTRS

A Bank of Korea board member said the won’s recent movements require close monitoring, expressing concern over the pace of its appreciation even as surging demand for AI chips supports South Korean exports, Reuters reported on Thursday following an exclusive interview.

The won gained around 13% against the U.S. dollar in the third quarter, marking its strongest quarterly advance since the fourth quarter of 1998. Hwang Kunil told Reuters that the speed and volatility of exchange-rate movements mattered more than the currency’s absolute level, adding that the recent pace of change had been faster than expected.

Hwang attributed the won’s gains to dollar inflows linked to the global AI boom, which has boosted demand for memory chips made by South Korean manufacturers SK Hynix and Samsung Electronics. He told Reuters that the AI-driven expansion was likely to continue for some time.

However, Hwang said the export boom had yet to translate into a broad-based recovery across South Korea’s economy. Private consumption was recovering slowly, while small and medium-sized businesses continued to face high delinquency rates and weak domestic demand, he told Reuters.

Hwang also said South Korea’s current account surplus could reach nearly $500 billion this year, exceeding the Bank of Korea’s August forecast of $450 billion.

On monetary policy, Hwang said he expected headline consumer price inflation to approach the central bank’s 2% target towards the end of the first half of 2027. He told Reuters that inflation should stabilise fully around that level by the end of 2027 or early 2028.

Hwang, who joined the central bank’s Monetary Policy Board in February 2024, is regarded as one of its more dovish members. Reuters reported that he voted against a quarter-point rate increase in August. The central bank held its policy rate at 3.00% this month after raising rates in July and August.

His comments highlight the policy challenge facing South Korean authorities as strong technology exports and currency movements coexist with a slower recovery in domestic demand.