The Bank of Korea Has Tried to Defend the Won
The reality is that usually central banks fail in their efforts to control foreign exchange rate volatility.  As posted here at the Seoul Gyopo Guide, the Japanese Yen has appreciated incredibly, to all-time strength against the U.S. Dollar.  That said, the fears of the nuclear situation in Japan, and its potential effect on Korea, has pushed the Korean Won down to its weakest level against the U.S. Dollar (and Euro, and Yen) in 2011.  This is decidedly very bad news for everyday Koreans, who rely on imports such as food and energy, to survive.  In short, inflationary pressures will increase again.

The Bank of Korea Should Raise Interest Rates Now
Rather than simply talking to the press, the Bank of Korea should use this window to increase interest rates.  That will make the Korean Won more attractive on the international marketplace.  If the Bank of Korea does nothing at this point, then perhaps more calm will be restored tot he situation.  However, the fact the continued demand for the Yen will continue unabated as the amount of reconstruction is revealed.
An increase in interest rates will also show another thing to the marketplace, which is that the Bank of Korea is ready, and able, to act, in accord with its mandate.  One of those mandates is to pursue price stability.  While in the past, there was ample reason for keeping the Korean Won weak for competitiveness’ sake, now inflation has the chance of getting out of control.  Fortunately, the international events have presented the Bank of Korea with the opportunity to both lower inflation, without hurting international competitiveness of Korean companies’ products.

The Situation is Fluid, But Inflation Is Real
The Seoul Gyopo Guide has tried to described the complicated combination of facts that Korea faces as its economy grows in stature. Unfortunately, the impact of this combination is difficult on everyday Koreans. While the situation will change, based on fact, and rumor, the Bank of Korea must maintain its steady hand, and pay attention to the powerful cross-currents affecting the Korean economy, and Korean citizens. If the so-called experts who so loudly criticized the Bank of Korea were correct a month ago, then the fact is that rates would have been higher and yet the exchange rates would be the same. It has, effectively, saved a bullet that can now be used to benefit the pursuit of its difficult mandate.