Emergency Martial Law Causes Exchange Rate to Soar... Sold $3.8 Billion in Q4 Last Year [Hankyung Foreign Exchange Market Watch]

It has been confirmed that the foreign exchange authorities net sold about $3.8 billion in the foreign exchange market in the fourth quarter of last year. This intervention was made as exchange rates fluctuated sharply following the declaration of martial law. The annual sales exceeded $10 billion.

According to the 'Foreign Exchange Authorities Net Transactions (Q4 2024)' data released by the Bank of Korea on the 31st, the foreign exchange authorities, including the Bank of Korea and the Ministry of Economy and Finance, net sold $3.755 billion in the foreign exchange market from October to December last year. After net purchasing $192 million in the third quarter of last year to build up foreign exchange reserves, the authorities switched to large-scale net selling in just one quarter.

Global uncertainty increased after Donald Trump was elected President of the United States in November last year, and domestic uncertainty also expanded significantly after President Yoon Seok-yeol declared martial law in December last year. It is understood that the authorities intervened as exchange rates fluctuated due to increased uncertainty.

The market intervention amount for the entire year was $11.179 billion. The foreign exchange authorities sold $1.82 billion in the first quarter and $5.796 billion in the second quarter. The annual intervention amount increased by 16.3% compared to 2023 ($9.61 billion).

Until the third quarter, the market intervention amount was expected to decrease compared to the previous year, but the intervention amount in the fourth quarter increased significantly, leading to a large overall intervention scale. However, it was less than the $45.86 billion during the short-term exchange rate fluctuations experienced in 2022 due to the Legoland incident.

The issue is that the exchange rate continues to rise this year as well. On this day, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1,472 won 90 jeon per dollar. It surpassed the highest level recorded after the declaration of martial law on December 30 last year (1,472 won 50 jeon) and reached the highest level in 16 years since March 13, 2009, during the global financial crisis.

Reporter Kang Jin-kyu josep@hankyung.com