Seoul: South Korea’s government has affirmed its commitment to stabilizing the rapidly weakening won, but stopped short of implementing any immediate policy interventions, leaving markets cautiously observant. The statement, made by Finance Minister Koo Yun-cheol, comes at a time when global financial uncertainties and domestic demand for foreign currency have placed unprecedented pressure on the nation’s exchange rate.
At a press briefing dedicated to foreign-exchange developments, Koo acknowledged that the won has become highly sensitive to fluctuations in global financial markets. He warned that speculative trading and sudden investor reactions could exacerbate volatility, further destabilizing the currency. “It is true that our domestic market is reacting to high uncertainty in global financial markets more sensitively than other currencies due to structural demand pressure for dollars,” Koo said.
Despite pledging close monitoring and a readiness to deploy “all available tools” if necessary, the minister refrained from detailing any short-term interventions. Market participants expressed disappointment at the absence of concrete action, with some analysts describing the briefing as largely symbolic rather than substantively reassuring. The won’s response was muted; after initially sliding, it recovered marginally to 1,465.5 per dollar, signaling limited market confidence in the government’s verbal assurances.
The won’s decline has accelerated over the past several months, losing more than 7% since mid-2025. The weakening is largely attributed to rising dollar demand, driven both by foreign investment outflows and increased overseas activity by domestic investors, including South Korea’s National Pension Service (NPS). While a consultative body involving the NPS has been formed to ensure long-term investment balance and stability, Koo emphasized that the fund will not be used as a short-term currency stabilizer.
Economists note that the currency’s volatility could heighten import costs, potentially driving domestic inflation and impacting companies reliant on imported raw materials. With the Bank of Korea expected to maintain its interest rate at its upcoming policy meeting, the central bank’s cautious approach, combined with the government’s limited immediate action, underscores the challenge of managing market expectations in a volatile global environment.
The situation in Seoul reflects broader emerging-market currency pressures, where domestic financial stability is increasingly linked to global investor sentiment. Analysts suggest that sustained market volatility may compel policymakers to consider more tangible interventions in the near future if the won continues to slide, particularly to preserve confidence among exporters and international investors.