Introduction
On 14 November 2025, Koo Yun-cheol, Deputy Prime Minister and Finance Minister of South Korea, publicly acknowledged heightened uncertainty in the foreign-exchange market and stressed that the government stands ready to deploy all available tools to address any persistent imbalances. The remarks come amid a backdrop of sharp currency moves, rising overseas investment outflows, and concerns about the durability of the won’s value.
In a meeting held at the Government Complex Seoul in Jongno District, central Seoul, Koo underscored that while the domestic stock market remains broadly stable and demand for Korean sovereign bonds remains solid, the FX front is experiencing increasing stress. The government’s message is clear: if the won faces sustained weakening, authorities will act.
Mounting Pressure On The Won
During the meeting attended by senior officials including the Governor of the Bank of Korea, Chairman of the Financial Services Commission, and Governor of the Financial Supervisory Service, the participants flagged a sharp climb in the won-dollar rate, which briefly exceeded 1,470 won per US dollar, driven by surging overseas investment by Korean residents.
The concern is that such currency weakness feeds on itself: a depreciating won can prompt further capital outflows or speculative positioning anticipating further weakness, thereby reinforcing the trend. Koo cautioned that if the FX imbalances driven by overseas investment persist, market expectations for a weaker won could become entrenched, which would damage the currency’s lower bound.
Structural Supply And Demand Issues Under The Spotlight
Beyond short-term volatility, the meeting emphasized structural vulnerabilities in South Korea’s FX market. The authorities recognized that the imbalances were not only cyclical but reflected deeper shifts: rising overseas investment by residents, changes in export receipts, and shifting global capital flows. The government stated that structural improvement in FX supply and demand is necessary.
In response, the Finance Ministry announced plans to work closely with major FX market participants, including institutional investors and large exporters, to monitor the drivers of won depreciation and formulate responsive measures. This targeted engagement signals an approach that goes beyond ad-hoc interventions, towards more systemic reform of FX supply and demand dynamics.
Government Readiness To Act: Tools In Play
Minister Koo’s comments included a specific pledge: if supply-demand imbalances persist, the authorities will actively utilize all available tools to restore FX market balance.
What this means in practical terms includes:
FX Interventions: The government may step into the market to buy won or sell dollars to support the currency.
Capital Flow Measures: Regulations or guidance that moderate large outbound flows or influence the timing and structure of resident investment abroad.
Communication and Signalling: Public statements and official reviews to shape market expectations and discourage speculative positioning.
Coordination Among Agencies: Multiple regulators working together signals an integrated approach.
Structural Reforms: Working with major exporters and institutional investors to smooth FX supply and demand dynamics over time.
By highlighting the readiness to use all measures, the government aims to send a deterrent signal: speculative attacks or one-way bets on won depreciation may face a firm response.
Broader Context: Domestic Stability And External Pressures
While the FX market drew special focus, the government’s review also touched on other aspects of financial stability. Officials noted that the domestic stock market is experiencing only short-term volatility and remains generally stable. Similarly, though government bond yields have risen amid shifting expectations about interest-rate trends, demand for Korean sovereign debt remains solid.
Yet, the FX market stands out as a vulnerability. With global investors increasingly churning through portfolios, the won faces exposure to global risk sentiment, including US interest-rate changes and global liquidity shifts, as well as domestic structural trends such as outbound investment and corporate FX demand. The government’s meeting reflects awareness that FX pressure may not be short-lived and merits proactive management.
Implications For Markets And Policy
For Market Participants
Currency traders and institutional investors should keep close tabs on:
Intervention Risk: The possibility that South Korean authorities will act to support the won may dampen speculative bets on sustained depreciation.
Flow-Driven Movements: The surge in outbound resident investment is a key driver; moderating those flows may shift FX dynamics.
Expectations and Sentiment: If markets believe the government will not allow a runaway won decline, downside pressure may be contained.
Correlations: Monitoring cross-asset indicators can provide early warning of FX stress.
For Policymakers
The government’s remarks signal a shift toward greater intervention-readiness and structural reform. Policymakers face the challenge of balancing:
Open Economy Needs vs. Stability: South Korea benefits from global capital flows and outward investment; restricting or moderating these could dampen growth.
Short-Term Stabilization vs. Long-Term Reform: Interventions can halt a slide momentarily, but structural imbalances require deeper reform.
Signalling vs. Action: The threat of all available tools raises expectations of action. Failure to deliver when needed could harm credibility.
Risks, Uncertainties And The Road Ahead
Several risk factors and uncertainties are critical to watch:
Global Monetary Environment: Shifts in US interest-rate policy, Fed balance-sheet movements, and global liquidity conditions could rapidly change the FX landscape facing the won.
Investor Behaviour: If resident overseas investment continues to surge, the won remains vulnerable to one-way depreciation pressure.
Market Sentiment: A global risk-off wave might push the won lower despite domestic policy efforts, exposing limits of intervention.
Policy Lags: Structural reforms take time; markets may remain skeptical if short-term fixes dominate.
Exchange-Rate Expectations: Once a weaker-won expectation is entrenched, it can become self-fulfilling, making policy efforts more costly.
For the medium term, the key question is whether the market believes the won has a credible floor and whether the government’s tools are considered effective and ready.
Conclusion
The public acknowledgment by Deputy Prime Minister Koo Yun-cheol that uncertainty in the foreign-exchange market is increasing marks a pivotal shift in South Korea’s stance toward currency-market stability. By emphasizing the readiness to deploy all available tools, the government signals a stronger posture intended to rein in speculative pressure and fortify the won.
However, signalling is only the beginning. The effectiveness of this stance will depend on timely action, coordination across institutions, and structural reforms to address supply-demand imbalances. For market participants, the key takeaway is that the FX landscape in South Korea may enter a phase of heightened intervention risk, and accordingly, the won-dollar pair may behave differently than in recent years.
