Rhee also said an expected delay in the U.S. interest rate cut timing and sticky domestic inflation have complicated the BOK's decision on when to pivot from tight monetary policy.
Receding expectations of a near-term rate cut by the U.S. Federal Reserve caused "a lot of headwinds" for the won, Rhee said during an International Monetary Fund panel session in Washington.
"Our exchange rate deviated a little bit from what could be justified by market fundamentals," Rhee said in reference to the South Korean won's moves in the past few weeks.
But he added that the recent exchange-rate market environment was different from that of mid-2022, when the dollar was rising steadily on expectations of sustained, high U.S. interest rates.
"This time is a little bit different," with the dollar's rise driven more by expectations of a delay in the timing of the Fed's first rate cut, Rhee said.
Once uncertainty over the U.S. rate-cut timing recedes, the pressure on emerging market currencies will likely subside, he said.
"I think the impact on the emerging market exchange rate from U.S. monetary policy changes ... will be transitory compared with one and a half years ago," Rhee said.
When the U.S. Federal Reserve hinted mid-last year the chance of a near-term rate cut, there were prospects the BOK could set monetary policy more independently from the Fed's decision, Rhee said.
Such prospects changed on fading chances of a near-term Fed rate cut, as well as stubbornly high domestic headline inflation that risked pushing up inflation expectations, he said.
"The pivot timing is tricky," Rhee said. "We'd like to see more evidence that inflation is going down as we expect."
(Reporting by Leika Kihara; Additional reporting by Kanishka Singh; Editing by Paul Simao and Andrea Ricci)
By Leika Kihara
