USD/KRW: Won eases from 1-week high as BoK holds base rate

The South Korean Won pulled back from a fresh one-week high against the US Dollar, after the Bank of Korea surprisingly left interest rates without change at its January meeting.

The Bank of Korea kept its base rate intact at 3%, against market consensus of a 25 basis point cut.

The rate decision came amid a weaker domestic currency pressured by recent US Dollar strength and as political instability in South Korea pushed the Won to its lowest level in 15 years.

The central bank cautioned that although inflation had stabilized and household debt was slowing, downside risks to economic growth had increased. A slowing recovery in consumption, weak construction investment and a weakening labor market provided proof of such a tendency.

In November, the Bank of Korea had forecast the South Korean economy would expand 2.2% in 2024 and 1.9% in 2025. But, growth outlook is now expected to fall below those forecasts.

The South Korean Won was little changed on the day against the US Dollar, with the USD/KRW currency pair last trading at 1,454.87.

The Won had earlier risen to 1,450.11 per dollar, or its highest level since January 8th.