Key Moments
- USD/KRW retreated toward 1500 after briefly moving above 1510 as the Bank of Korea held rates while striking a hawkish tone.
- The Bank of Korea kept its policy rate at 2.50% for the eighth straight meeting, with two board members voting for a 25bps increase.
- BBH’s Elias Haddad highlighted that KRW is more than -11% undervalued versus its real effective exchange rate trend, with this gap expected to remain during the current energy shock.
Market Reaction to BoK Policy Decision
Brown Brothers Harriman’s (BBH) Elias Haddad reported that USD/KRW slipped back toward 1500 after briefly topping 1510, following the latest policy decision from the Bank of Korea (BoK). The move in the currency pair came alongside equity market volatility, with the Kospi dropping as much as 5% before narrowing its decline to around 1%.
According to Haddad, the BoK delivered what he described as a hawkish hold. The central bank left its policy rate unchanged at 2.50% for the eighth consecutive meeting, in line with expectations, while indicating that its next policy adjustment is likely to be an increase.
BoK Forward Guidance and Policy Dissent
BoK Governor Shin Hyun Song emphasized the policy bias toward tightening, stating that the Board
“judged necessary to raise the Base Rate at an appropriate time.”
The decision was not unanimous. Haddad noted that
“two (Chang Yongsung, and Ryoo Sangdai) of the seven Board members dissented in favor of a 25bps hike, the first hawkish dissent of this cycle.”
Updated Growth and Inflation Projections
Haddad highlighted that the BoK revised its macroeconomic projections higher.
“Finally, BoK raised its 2026 real GDP growth (+0.6ppt to 2.6%) and CPI forecasts (headline: +0.5ppt to 2.7%, core: +0.3ppt to 2.4%).”
| Indicator | 2026 Forecast | Change |
|---|---|---|
| Real GDP Growth | 2.6% | +0.6ppt |
| Headline CPI | 2.7% | +0.5ppt |
| Core CPI | 2.4% | +0.3ppt |
KRW Valuation and the Role of the Energy Shock
Haddad underscored that the South Korean Won appears materially undervalued on a real effective basis. He wrote:
“Indeed, KRW is significantly undervalued. The won is over -11% undervalued relative to its real effective exchange rate trend, the most since 2009. KRW undervaluation is unlikely to unwind until the energy shock fades.”
This assessment suggests that, despite the BoK’s hawkish stance and upgraded economic projections, the currency’s mispricing may continue as long as the current energy shock persists.





