{"id":199813,"date":"2025-12-23T13:21:10","date_gmt":"2025-12-23T13:21:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/199813\/"},"modified":"2025-12-23T13:21:10","modified_gmt":"2025-12-23T13:21:10","slug":"govt-measures-fail-to-stop-wons-downhill-slide","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/199813\/","title":{"rendered":"Gov’t measures fail to stop won’s downhill slide"},"content":{"rendered":"

\"The<\/p>\n

The won-dollar exchange rate is displayed at a bank counter in Terminal 2 of Incheon International Airport, Tuesday. Yonhap<\/p>\n

Korea\u2019s demand for the U.S. dollar has been growing sharply across the board, pushing the value of the local currency to its lowest level since 1998, the height of the Asian financial crisis, according to economists and market analysts Tuesday.<\/p>\n

This trend will likely continue, and in a worst-case scenario the exchange rate could fall past 1,500 won per dollar in the coming days, far past the 1,380-won level analysts consider desirable for Asia\u2019s fourth-largest economy.<\/p>\n

\u201cDollar demand is unusually high across a range of market participants, and this is driving the won down to levels last seen during the Asian financial crisis, even though Korea\u2019s economy is not under strain,\u201d said Shin Se-don, professor emeritus of economics at Sookmyung Women\u2019s University.<\/p>\n

Moon Jung-hiu, a KB Kookmin Bank economist, echoed that view, saying, \u201cThe won is unusually weak due to an imbalance between supply and demand, while economic fundamentals are far better off than they were during the Asian financial crisis.\u201d<\/p>\n

Experts noted that the won has weakened despite Korea\u2019s foreign currency reserves rising to $430.6 billion over the past six months, ranking ninth in the world.<\/p>\n

The country also posted a record cumulative current account surplus of $89.58 billion from January to October, while annual exports are expected to surpass an unprecedented $700 billion in 2025.<\/p>\n

Alongside these developments, several major market players are seen as contributing to the won\u2019s steep drop.<\/p>\n

For instance, the National Pension Service (NPS), the state-run pension operator, added about 70 trillion won ($33.7 billion) to its overseas investments this year, bringing the total abroad to 771 trillion won, or 58 percent of its assets.<\/p>\n

Korean corporations\u2019 retained earnings abroad \u2014 profits kept overseas rather than repatriated \u2014 rose by $7.8 billion, a 40.2 percent increase from last year, while individual investors set a record with $32 billion in net purchases of U.S. stocks, supported in part by the artificial intelligence boom.<\/p>\n

\"\"<\/p>\n

Reflecting these trends, Bank of Korea (BOK) data showed the Korean currency averaging 1,421.16 won per dollar so far this year as of last week, which is already weaker than the 1998 average of 1,394.97 won.<\/p>\n

In daytime trading this week, the won breached 1,480 for the first time in eight months, closing at 1,480.1 on Monday and 1,483.6 on Tuesday.<\/p>\n

Regarding comparisons with other countries, Moon said the gap between dollar demand and supply in Korea is exceptionally large, as reflected in the won\u2019s high correlation with the Japanese yen against the dollar.<\/p>\n

The correlation is measured at 0.9 \u2014 close to the maximum of 1, which indicates two currencies moving almost exactly together, according to Moon.<\/p>\n

\u201cThe trend is concerning because Korea, unlike Japan, is not a major reserve currency, and its currency ideally should not move in lockstep with the yen,\u201d he added.<\/p>\n

Taking the sharp depreciation into account, some experts said the won-dollar rate is likely to remain around the 1,480 range, while others warned it could rise above 1,500.<\/p>\n

\u201cThe 1,480-won range appears to be the near-term peak,\u201d said Suh Jung-hoon, an analyst at Hana Bank, adding that financial authorities\u2019 willingness to stabilize the foreign exchange market could help limit further decline.<\/p>\n

Suh noted, however, that the current exchange rate is \u201cfar from\u201d the 1,380-won level he considers appropriate based on Korea\u2019s overall economic conditions, including its capacity to absorb internal and external shocks, support growth and bolster domestic demand.<\/p>\n

The KB Kookmin Bank economist forecast that the won-to-dollar rate could approach the 1,500 level but is unlikely to surpass it, saying, \u201cIt may come close, but only just shy of that threshold.\u201d<\/p>\n

By contrast, Lee Seung-suk, a research fellow at the Korea Economic Research Institute (KERI), said the won-dollar rate could rise beyond 1,500 and even move into the 1,530-1,540 range.<\/p>\n

\"Deputy<\/p>\n

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol, second from left, poses with Financial Services Commission Chairman Lee Eog-weon, third from left, Financial Supervisory Service Gov. Lee Chan-jin, left, and Bank of Korea Senior Deputy Gov. Ryoo Sang-dai ahead of a market oversight meeting at Government Complex Seoul, Thursday. Yonhap<\/p>\n

Dollar supply measures to take time<\/p>\n

Regarding a series of monetary measures taken by the government and central bank to stabilize the foreign exchange market, analysts said the policy direction is on the right track in increasing the dollar supply, though the impact is expected to be gradual.<\/p>\n

The measures include emergency meetings between the presidential office and major export-oriented conglomerates, a foreign exchange swap agreement between the BOK and NPS, and the temporary suspension of stress tests that had pressured financial institutions regarding their dollar holdings.<\/p>\n

Regulatory ratios for foreign banks\u2019 Korean subsidiaries, including Standard Chartered Bank Korea and Citibank Korea, were eased to facilitate the borrowing of foreign currency from their overseas headquarters to supply to the local market.<\/p>\n

\u201cThe measures will help financial institutions release dollars they have unnecessarily hoarded into the market, but it may take until early 2026,\u201d the Hana Bank analyst said.<\/p>\n

Moon, the KB Kookmin Bank economist, said the measures \u201care not a short-term fix to boost the won but a medium- to long-term policy aimed at bolstering market resilience and ensuring smooth functioning.\u201d<\/p>\n

Asked whether these measures could put Korea at risk of being labeled a currency manipulator by the U.S., the KERI research fellow downplayed the possibility.<\/p>\n

\u201cThey are intended to stabilize the won, not weaken it to make exports cheaper and gain an unfair trade advantage, which is what the U.S. warns against,\u201d he said.<\/p>\n

Seo described the risk as \u201cunlikely,\u201d noting that Korea agreed to provide the U.S. with monthly data on foreign exchange interventions as part of their bilateral tariff deal. \u201cThe agreement is meant to boost transparency in forex market operations at Washington\u2019s request, so concerns about currency manipulation can be set aside.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The won-dollar exchange rate is displayed at a bank counter in Terminal 2 of Incheon International Airport, Tuesday.…\n","protected":false},"author":2,"featured_media":199814,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[114,184,85,46],"class_list":{"0":"post-199813","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-il","11":"tag-israel"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/199813","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=199813"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/199813\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/199814"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=199813"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=199813"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=199813"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}