South Korean policymakers convened an emergency meeting in response to the South Korean won (KRW) trading at its weakest level against the US dollar (USD/KRW) since 2009, according to BNY’s Bob Savage [1]. During this meeting, top economic and financial officials pledged to take stern action against speculative and market-disruptive foreign exchange activities, emphasizing their commitment to support the currency [1]. Authorities stated they would monitor the FX market around the clock and act swiftly if volatility worsens [1].
As part of the defense measures, the National Pension Service (NPS) has resumed selling forward FX contracts after a pause earlier in the year, operating under a higher hedge ratio framework. This move signals active hedging by the NPS as the won continues to weaken and the market tests higher USD/KRW levels. Foreign exchange authorities indicated that the pension fund's forward sales in the Seoul FX market are expected to continue for the foreseeable future [1].
Despite these efforts to support the KRW, the KOSPI stock index has dropped sharply, falling 8%, which underscores broader risk-off pressure on Korean assets. The FX markets saw the KRW gain 1% following the announcement of government plans to support the currency, but the overall sentiment remains cautious due to ongoing market volatility [1].
CONCLUSION
South Korean authorities have taken decisive steps to defend the won, including resuming forward FX sales by the National Pension Service and pledging stern action against speculative activity. Despite these measures, Korean equities have experienced significant declines, reflecting persistent risk-off sentiment in the market.