South Korea's Won Strengthens Against Dollar to 1,400 Level, Easing July-August Rate Hike Concerns

According to bond market industry reports on July 14, the likelihood of South Korea's central bank raising its base rate in consecutive months (July and August) has diminished as the dollar-won exchange rate declined to the 1,400 won level.

Market analysts note that the 2007 back-to-back rate hike episode, which coincided with the subprime mortgage crisis and preceded the 2008 global financial crisis, serves as a cautionary precedent. That traumatic experience—when the Bank of Korea raised rates in July (to 4.75%) and August (to 5.0%) based on strong economic growth, only to face a credit freeze weeks later—is likely to weigh on policymakers' decisions regarding consecutive hikes.