FX looms as Korea's top financial risk: BOK survey

Staff members work at the Hana Bank dealing room in Seoul on the morning of Jan. 23. Yonhap.

SEOUL, Jan 23 (AJP) - The Korean won has stabilized and edged higher against the U.S. dollar following explicit verbal intervention by authorities, but foreign exchange volatility remains the biggest financial risk facing South Korea, according to a new Bank of Korea (BOK) survey.

Nearly seven in 10 financial experts flagged the exchange rate as a key source of risk, underscoring persistent unease despite recent market calm.

According to the BOK survey of 75 professionals from international investment banks, research institutes and academia released Friday, 66.7 percent cited foreign exchange fluctuations as one of the top five risks to the economy, while 26.7 percent identified it as the single most significant threat.

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The won’s prolonged weakness against the dollar — still hovering near levels seen during past crisis periods — has overtaken household debt, a longstanding concern, which was cited by 16 percent of respondents in the latest survey.

Other major risk factors included elevated housing prices in the Seoul metropolitan area and sluggish domestic economic growth.

Despite the heightened focus on the exchange rate, economists did not see an imminent financial crisis. The perceived probability of a financial shock occurring within one year declined to 12.0 percent last year from 15.4 percent in 2024. Medium-term risk perceptions also eased, with the estimated probability over a one- to three-year horizon falling sharply from 34.6 percent to 24.0 percent.

Confidence in the resilience of Korea’s financial system showed a corresponding improvement. The share of respondents rating their confidence as “high” or above rose to 54.7 percent last year, up from 50.0 percent in 2024.

“Respondents called for enhanced risk management against both domestic and external uncertainties, alongside stronger policy credibility and predictability,” the BOK said in a statement.

To bolster financial stability, experts urged authorities to stabilize foreign exchange and asset markets through closer monitoring and “clear and transparent communication.” The report also emphasized the need for a consistent policy mix to manage household debt and institutional efforts to address structural vulnerabilities across borrower segments, including the “orderly restructuring” of marginal firms.

The BOK said it plans to use the survey results to guide its analysis and monitoring of financial system vulnerabilities throughout the year.

As of 2 p.m. Friday, the won was trading at 1,468.10 per dollar, down 3.1 won from the previous session.
Kim Yeon-jae Reporter duswogmlwo77@ajupress.com

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