South Korea Issues Verbal FX Warning as Won Closes at 1,517.2 Per Dollar
Summary
- South Korea’s foreign-exchange authorities launched a joint verbal intervention after the won-dollar exchange rate closed at 1,517.2 won and neared the 1,520 level, saying the exchange rate’s moves were excessive.
- The authorities said the recent high exchange rate was driven by external uncertainty and foreign investors’ stock selling, while also signaling they would not simply stand by.
- The authorities said they were responding preemptively with a message that the exchange rate was excessive relative to the Korean economy’s fundamentals and that they would take firm action if needed.
Forecast Trend Report by Period
South Korea’s foreign-exchange authorities issued a joint verbal warning just before the close of day trading on May 22 after the won settled above 1,510 per dollar at 1,517.2. The Ministry of Economy and Finance and the Bank of Korea said the currency’s moves were excessive.
The message suggested authorities would stick with a cautious response, while signaling they would not stand by as the won weakened on external uncertainty and foreign investors’ stock selling.
The won closed at 1,517.2 per dollar on May 22, up 11.1 won from the previous session. It rose as high as 1,519.4 during the session, nearing the 1,520 level. It was the first time in more than 50 days that the daytime trading close finished above 1,510, since April 2.
Authorities had so far been cautious about both verbal intervention and direct market action. While last year’s rise in the won-dollar exchange rate was driven by domestic supply-demand imbalances, the recent weakness has stemmed mainly from external uncertainty, including the U.S.-Iran war. Officials also weighed the risk that intervention could fail to stabilize the market while only draining foreign-exchange reserves.
"With markets able to swing again on a single comment from U.S. President Donald Trump, it is extremely difficult for foreign-exchange authorities to get the timing right," a foreign-exchange market specialist who asked not to be identified said.
Still, with the won’s weakness continuing and the exchange rate nearing 1,520 during the session, the finance ministry and the BOK moved to verbally intervene. Authorities said the currency’s moves were excessive relative to the fundamentals of the Korean economy and that they would take firm action if necessary.
The statement was seen as a preemptive move after foreign investors’ cumulative selling over the past 10 days raised the prospect that the won could remain above 1,500 for an extended period.
Nam Jung-min, Hankyung reporter, peux@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
