The Bank of Korea will convene an extraordinary meeting of the Monetary Policy Board on the 19th to review market conditions, including the trend of a strong dollar-won exchange rate.

According to Bank of Korea (BOK), the extraordinary Monetary Policy Board meeting was scheduled ahead of the Bank of Japan (BOJ) policy rate decision. With changes in BOJ's monetary policy potentially affecting not only the yen but also the won, it is interpreted that Bank of Korea (BOK) has raised its alert level over foreign exchange market volatility.

Rhee Chang-yong, governor of the Bank of Korea, presides over a plenary session of the Bank of Korea's monetary policy committee at the central bank's headquarters in Jung-gu, Seoul, on the 27th last month. /Courtesy of News1

Market participants widely expect BOJ to raise its policy rate to 0.75% from the current 0.5% per year. That is because Japan's inflation rate has exceeded 2% for more than three years, and wage growth continues. If the policy rate is raised to 0.75%, it would be the highest level in about 30 years since Sept. 1995.

The won is regarded as a currency with a high degree of co-movement with the yen. When the yen strengthens, the won also tends to appreciate. On Jan. 24, when BOJ previously raised its policy rate to 0.5%, the won strengthened and the dollar-won rate closed at 1,431.3 won, down 6 won from the previous day.

Meanwhile, in the Seoul foreign exchange market that day, the dollar-won rate opened at 1,475.5 won, down 2.8 won from the previous day's weekly transaction closing price (as of 3:30 p.m.). It then fell further to as low as 1,474.2 won early in the session before returning to the 1,475-won level.

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