FX.co ★ Korean Won Weakens on Cautious Policy Signal

The South Korean won experienced a depreciation to approximately 1,451 on Friday, declining from the gains seen in the prior session due to renewed caution from the central bank impacting market sentiment. In its policy framework for 2026, the Bank of Korea indicated that any further monetary easing would be contingent upon factors such as inflation, economic growth, and financial stability, marking a departure from last year’s more lenient approach. This also suggests that the 2.5% policy rate could be maintained for a longer duration. Ongoing currency weakness is a significant concern, contributing to higher import costs and inflation, with inflation projections for the coming year escalating to roughly 2.0%. To address these exchange rate challenges, the Bank of Korea plans to enhance foreign exchange market operations and appeal to foreign investors. This strategy involves extending trading hours to a 24-hour schedule, easing offshore won regulations, extending financial network operational hours starting in April, and initiating a pilot offshore won settlement system by the end of the year.