Seoul: South Korea's major commercial banks are collaborating with government foreign exchange authorities to address the recent weakness of the local currency, the won. They are offering incentives for customers to sell U.S. dollars and reducing interest rates on foreign-currency deposits, as stated by officials on Sunday.

According to Yonhap News Agency, despite previous verbal interventions and policy measures by authorities, the won has hovered near the critical 1,450 won level against the U.S. dollar. This is attributed to the strong dollar, geopolitical tensions, and significant overseas equity investments by local investors. The currency was quoted at 1,473.6 per dollar on Friday, marking a decline after a brief rebound that ended a 10-session losing streak.

Authorities have urged banks to take active measures to stabilize the foreign exchange market. The Financial Supervisory Service (FSS) plans to meet with major commercial banks on Monday to encourage restraint in promoting U.S. dollar and other foreign currency deposits, as per industry sources.

Last week, officials from the Bank of Korea (BOK) engaged with local lenders to review required reserves on foreign currency deposits and related interest rate levels. The central bank has introduced a temporary plan to pay interest on foreign currency required reserves to enhance domestic dollar liquidity and support the won.

A KB Kookmin Bank official mentioned that they are organizing promotional events for exporters and customers converting foreign currency into the won and are considering additional steps to align with the government's exchange rate policy.

Woori Bank has reduced the dollar interest rate on its foreign currency deposit product for overseas travel from 1 percent to 0.1 percent, aiming to lessen the incentive to hold dollar deposits. This move follows a meeting earlier this month between the finance ministry and FX marketing managers at major banks, where the ministry advocated for curbs on aggressive marketing practices by banks, such as offering exchange rate discounts on dollar transactions, according to the sources.