Seoul warns of market intervention as won-dollar rate nears 1550

South Korea's Ministry of Economy and Finance has issued a strong warning regarding the volatile won-dollar exchange rate, signaling readiness to intervene if market imbalances intensify. Vice Minister Huh Jang stated that the foreign exchange authorities possess "sufficient response capabilities" and are prepared to implement "necessary market stabilization measures immediately" should the exchange rate deviate significantly from fundamentals due to excessive쏠림 (imbalance).

The warning comes as the won-dollar exchange rate hovers around the 1550 won mark. The ministry attributes the increased volatility to factors such as the heightened possibility of U.S. Federal Reserve interest rate hikes and sustained net selling of stocks by foreign investors. On July 2, the exchange rate opened at 1552.3 won per dollar, a slight decrease from the previous day.

During a recent meeting, discussions focused on advancing foreign exchange and capital market innovation. Key initiatives include the phased introduction of a "won internationalization roadmap" and the establishment of an offshore won settlement system. The government aims to allow foreigners to use the won more freely in offshore markets. Furthermore, the foreign exchange market is set to expand to 24-hour operations starting July 6, with the offshore settlement system planned for January next year.

Vice Minister Huh stressed the importance of maintaining external stability alongside increased market openness and global connectivity. "As market openness and global connectivity expand, securing external stability together is crucial," he said. "We will meticulously build external safety nets in line with the changing market environment."