Commerzbank highlights that South Korean authorities have intensified FX monitoring to stabilize the Korean Won, including more frequent reviews of banks’ FX positions and joint inspections with the Bank of Korea. USD/KRW is consolidating around 1,520 after touching its highest level since 2009. Officials hope these steps will curb speculative pressure and support KRW in the near term.

Authorities target speculative pressure on Won

"South Korean authorities stepped up efforts to stabilize the won, shifting from verbal warnings to direct supervisory action. The Financial Supervisory Service (FSS) has shortened its review of major banks’ FX positions from monthly to weekly. "

"This could potentially move to a daily basis, implying greater scrutiny if KRW fails to stabilize. There were also hints of moral suasion as it urged banks to avoid aggressive marketing of dollar deposits or positioning that could worsen KRW volatility."

"The Bank of Korea (BoK) and the FSS will also begin joint inspections of major FX banks, the first in 14 years, to assess whether trading activity risked destabilizing the market. The authorities said they will examine whether participants attempted to move or pin exchange rates for improper gains, with violations subject to strict penalties."

"The Kospi is one of the best-performing equity markets in the world so far this year. It is still up 83% so far this year, despite correcting by over 12% from last week's peak. It gained 76% last year on the back of the AI boom. KRW has been under pressure due to net foreign equity outflows, higher oil prices, and lingering geopolitical uncertainties stemming from the Middle East."

"USD/KRW is holding around the 1,520 level after climbing to 1,558 last Friday, the highest since 2009. Year-to-date, KRW is down 5.4%, the third worst-performing Asian currency, behind INR (-5.9%) and IDR (-7.3%). The latest steps may help curb speculative pressure in the near term and so far this week, KRW has strengthened by more than 2% vs USD."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)