Seoul: Foreign exchange authorities have declared that an excessively weak Korean won is undesirable, signaling their strong commitment to stabilizing the local currency through comprehensive policy execution.
According to Yonhap News Agency, this verbal intervention comes as the Korean won approaches its weakest level in 16 years against the U.S. dollar, despite multiple stabilization efforts by authorities. The Finance Ministry and the Bank of Korea (BOK) emphasized their commitment to addressing the issue, noting that recent agency-specific measures will soon demonstrate their capacity for comprehensive policy execution.
The Korean won fell below the critical 1,450-won level against the dollar in November, a low not seen since April. On Tuesday, it was quoted at 1,483.6 per dollar, marking the lowest level since April 9, when it hit 1,484.1. This figure was the weakest since March 12, 2009, during the global financial crisis.
On Wednesday, the won opened weaker at 1,484.9 per dollar but showed improvement following the authorities' intervention, trading at 1,470.2 per dollar by 9:30 a.m.
Suh Jeong-hoon, a researcher from Hana Bank, noted that despite efforts to stabilize the market and foreign investors' net stock buying, the won's weakness persists. This trend appears driven by demand for dollars from importers and investors seeking overseas equities investments ahead of the year-end.
To address these challenges, the finance ministry, BOK, National Pension Service (NPS), and the welfare ministry have established a consultative body to develop a "new framework" to align NPS' investment returns with market stability. The NPS' significant overseas investments impact the foreign exchange market, and analysts speculate that the fund may engage in currency hedging by selling large amounts of dollars.
The welfare ministry plans to form a task force to devise detailed strategies for NPS' currency-hedging approach. Additionally, the government and BOK have announced measures including adjustments to the foreign-exchange position system, reducing foreign currency liquidity stress tests, and expanding foreign currency lending in Korean won to residents.
An emergency meeting has also been convened by the presidential office with leaders from the country's seven largest companies to explore ways to stabilize the local currency.