Key facts
- South Korea's vice finance minister, Huh Chang, stated the won is significantly misaligned with economic fundamentals.
- Seoul is in close communication with Japan and other key allies regarding foreign exchange issues.
- The South Korean won has depreciated 7.4% against the U.S. dollar this year.
- The government is prepared to deploy measures to stabilize the dollar-won market.
- South Korea is set to transition to a 24-hour dollar-won trading cycle.
South Korea's vice finance minister, Huh Chang, announced on Thursday that Seoul is in close communication with Japan and other allies regarding foreign exchange matters, emphasizing that the South Korean won has become significantly misaligned with economic fundamentals.
Speaking at a news conference, Huh stated, "We are always working closely with Japan and other relevant countries and exchanging information very closely." He added, "The won is currently misaligned compared to the economy's fundamentals." These remarks come just days before South Korea's historic shift to a 24-hour dollar-won trading cycle.
While declining to elaborate on potential interventions, Huh assured that the government is ready to deploy measures to stabilize the dollar-won market if illiquidity leads to excessive price swings. The won is currently trading near a 17-year low against the dollar, having fallen 7.4% this year. This contrasts sharply with the benchmark KOSPI index, which has surged approximately 85%.
Deputy finance minister Moon Ji-sung, also present, confirmed that Seoul maintains communication channels with Tokyo and Washington on forex issues. Moon also indicated that the government expects forex trading volumes from the offshore non-deliverable forward (NDF) market to shift towards the onshore spot market with the extended onshore trading hours, and that measures are being reviewed to encourage this transition.