South Korea Spent Over $10 Billion to Defend Won in Q1

South Korea's foreign exchange authorities injected more than $10 billion into the market during the first quarter of 2024 in an effort to stabilize the won's value against the U.S. dollar. Despite these significant interventions, the won has continued its downward trend, nearing a critical 1550 won per dollar mark.

Data released by the Bank of Korea on May 30th revealed that foreign exchange authorities recorded a net selling of $13.628 billion for market stabilization purposes in the first quarter. This marks the sixth consecutive quarter of net selling, with the total amount reaching $45.352 billion since the third quarter of 2019, when the Bank of Korea and the Ministry of Economy and Finance began quarterly disclosures of net foreign exchange transactions.

The continuous depreciation of the won is occurring despite the authorities' active market management. The weekly closing price of the dollar against the won rose from 1439.7 won at the end of February, shortly after the U.S.-Iran conflict, to 1530.1 won by the end of the first quarter. On May 30th, the rate approached 1550 won, a level not seen since March 6, 2009.

Analysts attribute the won's weakness to a combination of factors, including the strengthening U.S. dollar amid expectations of continued interest rate hikes by the U.S. Federal Reserve, foreign investors' net selling of South Korean stocks, and the weakening Japanese yen. The dollar index, measuring the dollar's value against major currencies, has remained elevated.