Foreign exchange authorities conduct director-general-level 'verbal intervention' for first time in 1 year 8 months…Exchange rate drops 10 won [Hankyung FX Market Watch]

On the 24th, the foreign exchange authorities issued a market-stabilizing message in the names of the Director-General of International Finance at the Ministry of Economy and Finance and the Director of the International Department at the Bank of Korea. A verbal intervention in the name of a director-general is the first in 1 year and 8 months since last April.

The title of the authorities' message was "Excessive weakness of the won is undesirable." Through the message, the authorities stated, "Over the past one to two weeks, we held a series of meetings and organized the situation to demonstrate the government's strong determination and comprehensive policy implementation capability by announcing measures by each ministry and agency; this will soon be confirmed."

The message was issued in the names of Kim Jae-hwan, Director-General of International Finance at the Ministry of Economy and Finance, and Yoon Kyung-soo, Director of the International Department at the Bank of Korea. The fact that the foreign exchange authorities conducted a director-general-level verbal intervention was analyzed as effectively signaling the most proactive willingness to intervene in the market.

Previously, on April 16 last year, when the exchange rate touched 1400 won intraday, the authorities issued a message under the names of then Director-General Shin Jung-beom of the Ministry of Economy and Finance's International Finance Bureau and former International Department Director Oh Geum-hwa. That intervention curbed the exchange rate's rise at the time, and a month later the rate fell to 1340 won, so it was analyzed as a successful intervention that reversed the direction.

More recently, a verbal intervention message was issued in October, but it was not in the name of a director-general. The Bank of Korea explained that it was an "operational-level intervention, a lower level than a director-general-level intervention."

Following the authorities' market intervention message, the won–dollar exchange rate plunged by more than 10 won. Early in the session it fell to as low as 1465 won 20 jeon per dollar, and as of 9:18 it was trading at 1469 won 80 jeon.

Reporter Kang Jin-kyu josep@hankyung.com