World Economic Forum Special Report

Currency Wars Can’t Be Won: Bank of Korea Chief

Bank of Korea Gov: Tensions in Capital Markets Have Eased

The Bank of Japan's decision to adopt a more aggressive monetary policy has not gone down well with South Korea, whose currency has strengthened rapidly as a consequence. Its central bank head tells CNBC that countries trying to weaken their currencies will not succeed in the long run.

Bank of Korea Governor Kim Choong-soo agreed with the view that no one can win a war of competitive currency devaluation.

"Basically, the level of foreign exchange has to be determined by market fundamentals in the medium to long-run. But in the short run, we all know that there are times where noises can matter, disturbances can take effect. But that's only for the short term period," Kim told CNBC on the sidelines of the World Economic Forum in Davos.

The South Korean won, like the U.S. and Australian currencies, has appreciated 14 percent against a broadly-weakening yen since mid-November amid moves in Japan to adopt a bold monetary policy to revive a weak economy.

(Read More: Here's How 'Abenomics' Will Benefit South Korea)

The Bank of Japan on Tuesday set a 2 percent inflation target and made an open-ended pledge to pump trillions of yen into the economy via asset purchases from 2014.

"We all know the grave consequences of competitive devaluation efforts which we experienced some decades ago. So I think it's time to sit together to talk about that. We live in a global economy so you yourself cannot do something alone," Kim said. "You have to cooperate with your partners."

There are some expectations that the yen will be on the agenda at a meeting of finance ministers from the Group of 20, a gathering of developed and developing economies, next month.

The yen's rapid depreciation has raised concerns globally that governments using monetary policy to weaken their currencies will only prompt others to do the same in order to keep currencies competitive, in turn sparking a "currency war."

(Read More: Japan Denies Currency Manipulation Claims Ahead of G20)

Rhetoric globally regarding currencies has picked up, with German Chancellor Angela Merkel on Thursday expressing concern about currency manipulation and South Korea's finance minister on Wednesday saying Seoul would fight the rapid appreciation of the won, which is hurting exporters.

Asked whether South Korea would be forced to respond to the Bank of Japan by managing the won in a more meaningful way for the country's manufacturers, Kim said: "It all depends upon how markets respond to such moves, and the markets have changed over time… our central bank will do whatever it's supposed to do to protect the high volatilities in the financial sector."

(Read More: More Stimulus in South Korea? Depends on China)

"And I'm particularly concerned about the volatilities. If changes are made too rapidly, we all know that will create uncertainties and we have to do something to prevent that from happening," Kim added.