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Companies Accumulate Dollars as Exchange Rates Rise Amid Forex Market Drought The foreign currency market is experiencing a paradox where there is an abundance of dollars, yet they are difficult to obtain in the forex market. This discrepancy is attributed to export companies holding onto dollars in foreign currency deposits instead of converting them to won, which is limiting the supply of dollars in the spot exchange market. Experts suggest that expectations of high exchange rates are encouraging companies to retain their dollar holdings.According to the Bank of Korea on July 14, corporate dollar deposits increased from $81.93 billion in January to $80.04 billion in April and $82.99 billion in May, after a decline to $72.71 billion in March. In contrast, personal dollar deposits decreased from $14.4 billion to $12.57 billion during the same period.The contrasting trends in dollar holdings between corporations and individuals indicate that the increase in foreign currency deposits is primarily driven by businesses. In March, corporate dollar deposits temporarily fell due to payments in won to domestic suppliers and corporate tax obligations, but they quickly rebounded, surpassing early-year levels by May. This suggests a strengthened inclination among companies to hold dollars this year.Analysis indicates that export companies are opting to keep dollars in foreign currency deposits rather than converting them to won, resulting in a reduced supply of dollars in the spot exchange market. This phenomenon is evident in the differing conditions of the foreign currency funding market and the forex market. While transactions involving borrowing dollars against won collateral are active in the foreign currency funding market, leading to favorable dollar procurement conditions, the forex market continues to face a shortage of dollars, keeping the won-dollar exchange rate elevated. Last month, the rate approached 1,560 won, and it has remained in the high 1,490s this month.Moon Da-woon, a researcher at Korea Investment & Securities, stated, The premium reflected when borrowing dollars in the foreign currency funding market has dropped to historical lows, even turning negative. While dollars are not scarce in the foreign currency funding market, there is a shortage in the forex market, causing exchange rates to surge. Experts analyze that expectations of continued high exchange rates are further increasing corporate dollar holdings. As foreign investment funds experience net outflows due to profit-taking from rising stock prices and rebalancing, the supply-demand dynamics are leading to a dollar shortage. Companies anticipating rising exchange rates are delaying dollar sales, which is intensifying actual upward pressure on exchange rates. This cycle is exacerbated by a trend of reducing currency hedging and increasing dollar holdings, further decreasing the influx of dollars into the forex market.Looking ahead, there are indications that factors prompting companies to sell dollars may increase in the second half of the year, potentially allowing some liquidity to flow into the spot exchange market. Factors such as large-scale forward sales by Hanwha Ocean, inflows from SK Hynix American Depositary Receipts (ADRs), increased dollar inflows due to strong semiconductor exports, and demand for currency exchange for corporate tax prepayments are all cited as potential contributors to increased dollar supply. In fact, the recent drop in the exchange rate to the high 1,490s has been attributed to the effects of SK Hynix ADR conversion volumes.Moon added, The governments foreign exchange supply and demand measures are gradually working to alleviate the supply-demand imbalance. Accordingly, adjustments in supply and demand are expected to emerge, leading to a gradual decline in expectations regarding exchange rates. * This article has been translated by AI. July 14, 2026 15:32 -
Increase in Foreign Investment Leads to Rise in Individual Forex Regulation Violations The number of individuals penalized for failing to comply with reporting obligations during overseas investments and real estate transactions has increased for the fourth consecutive year. While the total number of violations of foreign exchange regulations decreased compared to the previous year, individual violations rose.According to the Financial Supervisory Service on July 14, the total number of foreign exchange regulation violations last year was 1,072, down by 65 from 1,137 the previous year. Among these, 629 cases resulted in fines, 350 received warnings, and 93 were reported to investigative agencies.By type of violator, corporations accounted for 631 cases, or 58.9%, while individuals represented 441 cases, or 41.1%. The number of individual violations has increased from 317 in 2022 to 341 in 2023, 386 in 2024, and 441 last year.In terms of transaction types, violations related to overseas direct investment were the most common, totaling 478 cases, or 44.6% of the total. This was followed by 161 cases of monetary loans, 97 cases of overseas real estate transactions, and 88 cases of securities trading.The most common violation was the failure to report new transactions, which accounted for 577 cases, more than half of the total. There were also 372 cases where individuals did not report changes in investment amounts, maturities, or ownership names. Additionally, there were 99 cases of failure to report after-the-fact.The Financial Supervisory Service explained that even if the investment amount is as low as $1 or if retained earnings are converted to capital without actual fund movement, the obligation to report still applies. Changes in the name of the local corporation, investment amount, location, or share transfers also require updated reporting. For overseas real estate, if a property is initially reported as jointly owned but later acquired solely, prior notification of the change is necessary. After selling real estate, a disposal report must be submitted within three months, in principle.* This article has been translated by AI. July 14, 2026 12:08
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FX Dealers Assess 24-Hour Forex Market Launch The domestic won-dollar forex market has entered a 24-hour trading system for the first time in history, launching without significant disruption. Current FX dealers report that while trading volume during the early morning hours remains limited, the initial shock of opening has lessened, and exchange rate volatility is expected to decrease.On July 7, a forex dealer at a major bank told Aju Economy in an interview, The closing price of the offshore non-deliverable forward (NDF) last night and the opening price in the domestic market at 6 a.m. showed almost no difference, adding, The effect of reduced volatility at the opening was noticeable.He began his shift at 6 a.m. that day, taking over from the overnight team. Despite overseas events such as the release of the U.S. services purchasing managers index (PMI), there was no significant shock to the market. He noted, There was more trading in the regional spot market than expected, and the volume of trades covered by NDF has decreased significantly. Although trading was not very active due to the initial implementation of the system, the market moved calmly.Since July 6, the domestic won-dollar forex market has transitioned to a 24-hour system, operating from 6 a.m. on Monday to 6 a.m. on Saturday, excluding weekends and January 1. This change moves away from the previous system that operated primarily from 9 a.m., aligning trading conditions with global forex market trends.Lee Seok-jin, a forex dealer at Hana Bank who worked the 6 a.m. shift on the first trading day, stated, Previously, it was routine to check the NDF market flow in preparation for the 9 a.m. opening, but now we are actually conducting spot forex trading from 6 a.m., which has changed our work approach entirely.Trading between 6 a.m. and 9 a.m., which attracted significant interest from market participants, proceeded in a relatively calm atmosphere. The dealer remarked, On the first day, participants were more inclined to observe the market rather than actively trade. Although the trading volume was not high, the bids were more tightly formed than expected, indicating that market functions were operating stably.He added, While it may not be easy to see a significant increase in trading volume immediately, as participation from foreign investors and import-export companies gradually expands, liquidity will naturally increase, especially with the establishment of the won payment system in the second half of the year.The market is also anticipating changes in exchange rate movements. Previously, events occurring in overseas financial markets, such as New York, would be reflected all at once at the domestic markets opening at 9 a.m., often leading to increased volatility right after opening. However, with trading now continuing from 6 a.m., materials that arise overnight are expected to be reflected in prices sequentially, increasing the likelihood of continuous exchange rate movements.The dealer explained, In the past, significant events in the U.S. overnight would often cause the exchange rate to spike or plummet right at the 9 a.m. opening. Now, with trading occurring in the early morning, the exchange rate is likely to move more continuously, and the initial volatility at opening may gradually ease.However, he anticipates that an adjustment period for the market is inevitable. He stated, Market participants are still in the process of adapting to the new trading hours, and the true benefits of a 24-hour forex market will only be realized as trading builds up and foreign investor participation increases.Forex authorities also assessed that the market operated stably on its first trading day. A Ministry of Economy and Finance official remarked, In the initial phase, it is more important to ensure the system is securely established than to increase trading volume, and we expect market participation to gradually expand on a stable operational foundation.* This article has been translated by AI. July 7, 2026 16:36
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South Korea's Forex Market Shifts to 24-Hour Trading System South Koreas foreign exchange market has transitioned to a 24-hour trading system for won-dollar transactions. Major international media outlets have described this move as a symbolic change reflecting the opening of the financial market. However, concerns have been raised that extended trading hours could increase exchange rate volatility amid a continuing depreciation of the won. As of July 6, South Korea has expanded the trading hours for won-dollar transactions to 24 hours during the week. The new schedule allows trading from 6 a.m. on Monday to 6 a.m. on Saturday. The Wall Street Journal reported that this measure aims to enhance accessibility for foreign investors in the South Korean market. Reuters also noted that this change is part of efforts to include South Korea in the MSCI developed markets index. Recently, MSCI maintained South Koreas status as an emerging market in its annual market classification. Reuters highlighted that the conditions for utilizing the South Korean foreign exchange market have been cited as a limiting factor for inclusion in the developed markets index. The timing of the implementation is critical. The Wall Street Journal pointed out that the won has been depreciating against the dollar for several months. Since the beginning of this year, the won has fallen about 6% against the dollar, showing a weak performance compared to other major currencies. On the first day of the new trading system, the won-dollar exchange rate continued to decline, starting at 1,527.41 won and rising to 1,534.15 won. Factors contributing to the wons weakness include foreign capital outflows and increased demand for dollars. The Wall Street Journal cited foreign exchange strategists from OCBC, who analyzed that selling of won-denominated assets by foreigners, increased overseas investments by domestic investors, and a strong dollar are putting pressure on the won. There are also forecasts that the wons depreciation may continue. It was explained that the downward pressure on the won could ease only if foreign selling of domestic stocks decreases or if the dollar strengthens and U.S. Treasury yields decline. Bloomberg and Reuters have reported on the potential for exchange rate instability due to the expanded trading hours. The 24-hour system allows foreign investors to buy and sell won even after the South Korean market closes, helping to mitigate exchange rate risk. However, during late-night hours when trading volume is low, even small orders can cause significant price fluctuations. This change also places a burden on bank dealing rooms and foreign exchange authorities, who will need to monitor the market overnight. Foreign exchange authorities have stated their commitment to respond to rapid exchange rate fluctuations. The domestic government believes that the current value of the won is undervalued compared to the fundamental strength of the South Korean economy. They have also indicated readiness to respond if prices fluctuate sharply due to a lack of liquidity. Major international media outlets view the 24-hour system as a turning point for the opening of South Koreas foreign exchange market. However, they emphasize that for this system to serve as a practical stepping stone for inclusion in the MSCI developed markets index, sufficient trading volume and stable market operations during nighttime hours must be ensured.* This article has been translated by AI. July 6, 2026 13:52 -
Korean Won-Dollar Exchange Rate Fluctuates in 24-Hour Forex Market Launch As the foreign exchange market transitions to a 24-hour trading system, the won-dollar exchange rate is fluctuating around the 1,530 won mark. According to the Seoul foreign exchange market, as of 9:30 a.m. on July 6, the exchange rate for the Korean won against the U.S. dollar is trading at 1,532.7 won. The rate started at 1,527.60 won at 6 a.m. and has seen a slight upward trend since then. Despite some easing of external uncertainties, the exchange rate, which had remained stubbornly high, dropped nearly 30 won on July 3, raising hopes for a shift in market sentiment. With the dollars strength somewhat diminishing, there is an increasing likelihood that exporters, who had been concerned about the rate rising to 1,600 won, will begin selling dollars, which could exert downward pressure on the exchange rate. Starting today, the won-dollar foreign exchange market will operate 24 hours a day from 6 a.m. on Monday to 6 a.m. on Saturday, excluding weekends and January 1. Deputy Prime Minister Koo Yun-cheol emphasized during his visit to the Hana Bank dealing room that the launch of the 24-hour foreign exchange market reflects the fundamentals of the Korean economy, confirmed by strong external soundness, record-high current account surpluses, and inclusion in the World Government Bond Index (WGBI), as well as high demand from foreign investors. Min Kyung-won, an economist at Woori Bank, noted that while foreign selling in the domestic stock market and remittance burdens remain, the return of domestic companies demand for won conversion is likely to prevent a one-sided increase in the exchange rate. However, he added that low-price buying by importers and foreign remittance demand will support the lower end of the exchange rate.* This article has been translated by AI. July 6, 2026 09:44 -
24-Hour Forex Market Launches Amid Concerns Over Volatility The 24-hour foreign exchange market is set to begin operations. There are expectations that absorbing offshore non-deliverable forward (NDF) trading into the domestic market will reduce currency fluctuations, but concerns about increased volatility due to low liquidity during nighttime trading persist. According to the Seoul foreign exchange market on July 2, trading hours will transition to a 24-hour continuous system starting July 6. This change allows for won-dollar transactions every day except weekends and January 1. The opening of the foreign exchange market around the clock is anticipated to absorb offshore NDF trading. NDF transactions settle the difference between a predetermined exchange rate and the actual rate at maturity in designated currencies, such as dollars, without exchanging actual won overseas. The government has identified NDF trading as a significant factor contributing to currency fluctuations. When bets against the won are placed overseas overnight, the domestic market often opens with a lower actual value of the won. After the Seoul market closes, if the exchange rate rises in the New York NDF market, domestic investors tend to interpret this as a leading indicator for the next trading days exchange rate increase. Shin Hyun-sung, the governor of the Bank of Korea, has referred to this phenomenon as the tail wagging the dog. The extension of trading hours is expected to mitigate these negative factors. In July 2024, the Seoul foreign exchange market significantly extended its trading hours from 3:30 PM to 2 AM. This change has been credited with reducing gap risk by allowing real-time reflection of overseas events during the night. According to the Capital Market Research Institute, the average gap volatility before the extension was 0.306%, fluctuating between 0.2% and 0.5%. After the extension, it dropped to an average of 0.145%, moving within a range of 0.1% to 0.2%. However, some analysts have raised concerns about increased volatility due to low trading volumes during nighttime hours. Morgan Stanley Capital International (MSCI) noted in its annual market classification review last month that while trading hours have been extended to 2 AM, nighttime trading volumes are still insufficient, and bid-ask spreads are not as tight as in developed currency markets. According to Hanwha Investment & Securities, volatility in the foreign exchange market has increased by 30.4% during nighttime hours since the extension. Researcher Choi Kyu-ho stated, Since the foreign exchange market opened 24 hours, the average gap between quarterly high and low exchange rates (103.1 won) could widen by 20%, leading to a won-dollar exchange rate band of 120 won. This indicates ongoing liquidity issues with widening bid-ask spreads and thin order volumes. As the won-dollar exchange rate remains high in the 1550 won range, some analysts believe that the 24-hour opening will not change the direction of the exchange rate. The current rate is significantly influenced by foreign inflows. In the stock market, rising prices have led to profit-taking and rebalancing by foreign investors. As of the previous day, foreign investors had net sold 150.7476 trillion won in the securities market this year. Wi Jae-hyun, a researcher at Kyobo Securities, noted, The primary factor driving the rise in the exchange rate appears to be the rebalancing sales by overseas passive funds. Given the relative returns in the global stock market, it is likely that these rebalancing sales will continue for the time being. If rebalancing sales persist in the second half of the year, there may be no factors to prevent the upper limit, and we need to keep the upper limit for the third quarter open to 1600 won.* This article has been translated by AI. July 2, 2026 16:04 -
Korea's Forex Market Transition to 24-Hour Trading Faces MSCI Inclusion Challenges Starting July 6, the won-dollar forex market will transition to 24-hour trading, marking a significant step in the governments efforts to modernize the forex market. However, experts warn that simply extending trading hours will not guarantee inclusion in the Morgan Stanley Capital International (MSCI) developed market index, emphasizing the need for further reforms, such as the internationalization of the won, to enhance accessibility. According to the government, the shift to 24-hour trading is a key component of its forex market modernization strategy. This change will allow foreign investors to trade the won without time constraints, significantly improving market accessibility. The government hopes this will bring it closer to meeting the market openness standards required by MSCI. Inclusion in the MSCI developed market index is one of the main goals of the governments capital market modernization initiative. MSCI classifies global stock markets into developed markets (DM), emerging markets (EM), and frontier markets, with many global passive funds adjusting their investment allocations based on these classifications. However, market analysts believe that merely extending trading hours will not be sufficient to meet MSCIs criteria. MSCI evaluates various factors, including foreign investor access, the freedom of forex transactions, payment convenience, and regulatory predictability. In fact, MSCI did not include South Korea in its watchlist for potential inclusion in the developed market index as of June 23, citing the inability to conduct offshore physical delivery of the won and insufficient liquidity in the domestic forex market as limiting factors. This suggests that even with extended trading hours, if foreign investors cannot freely obtain and settle transactions in the won offshore, the perceived improvement in accessibility may be limited. The government is now pursuing the internationalization of the won as the next step in opening the forex market. The Ministry of Economy and Finance plans to announce a won internationalization roadmap this month, aimed at enhancing the infrastructure for won trading and settlement, and facilitating foreign investors access to the won offshore. The government also intends to expand the use of the won in current transactions and introduce an offshore won payment system starting in January next year. Experts agree that the key to MSCI inclusion lies more in the internationalization of the won than in the mere extension of trading hours. While increasing trading hours is a first step toward improving market accessibility, a conducive environment for foreign investors to trade and settle transactions in the won without inconvenience is essential to meet MSCIs market openness standards. Choi Kyu-ho, a researcher at Hanwha Investment & Securities, stated, The 24-hour opening of the forex market could increase volatility, but it is a necessary step, regardless of whether it happens sooner or later. Foreign institutional investors consider global rebalancing, internal regulations, and risk management comprehensively, so expecting a significant shift in investment direction solely from extended trading hours is unrealistic. As the internationalization of the won progresses, there are calls to strengthen market stability measures to accommodate increased capital movement. The government also plans to enhance external safety nets alongside market opening. Heo Jang, the Second Vice Minister of Economy and Finance, emphasized, The forex authorities have sufficient capacity to respond, and if the exchange rate deviates from fundamentals and excessive concentration occurs, we are prepared to implement necessary market stabilization measures immediately.* This article has been translated by AI. July 2, 2026 16:04 -
South Korea's Forex Authorities Sell $13.6 Billion Amid High Dollar Exchange Rate In the first quarter of this year, the won-dollar exchange rate remained high in the upper 1,450 won range, prompting South Koreas foreign exchange authorities to sell over $13.6 billion to stabilize the market. While this intervention was lower than the record high in the fourth quarter of last year, it still marked the fourth-largest dollar supply in history. According to the Foreign Exchange Authorities Net Transaction Report released by the Bank of Korea on June 30, the authorities sold a net total of $13.628 billion in the foreign exchange market during the first quarter. This figure represents a decrease from the fourth quarter of last year, which saw net sales of $22.467 billion. However, it significantly exceeded the net sales of $2.96 billion in the first quarter and $797 million in the second quarter of last year, as well as $1.745 billion in the third quarter. The foreign exchange authorities intervene by supplying dollars and purchasing won when the won-dollar exchange rate surges or when market volatility becomes excessive. Since the third quarter of 2019, the government has been disclosing the difference between total dollar purchases and sales by the foreign exchange authorities quarterly to enhance market transparency. In the fourth quarter of last year, despite a current account surplus, significant dollar outflows due to residents overseas securities investments led to the largest net sales by the foreign exchange authorities on record. The trend of high exchange rates continued into the first quarter of this year, resulting in continued large-scale net dollar sales by the authorities. The combined net sales of dollars in the fourth quarter of last year and the first quarter of this year reached $36.095 billion. Throughout the first quarter, the won-dollar exchange rate remained elevated. The average exchange rate for the won against the dollar in the Seoul foreign exchange market was recorded at 1,466.9 won. The monthly average rates were 1,456.51 won in January and 1,449.32 won in February, with a significant rise to 1,486.64 won in March amid the outbreak of conflict in the Middle East. Notably, in March, the average daily fluctuation of the exchange rate expanded to 11.4 won, indicating extreme volatility. However, the net purchases of U.S. stocks by residents decreased compared to the previous quarter. According to the Korea Securities Depository, domestic investors net purchases of U.S. stocks in the first quarter amounted to $10.644 billion, down approximately 22% from $13.587 billion in the previous quarter. These measures to defend the exchange rate have led to a decrease in foreign exchange reserves. South Koreas foreign exchange reserves fell from $428.05 billion at the end of last year to $423.66 billion at the end of the first quarter. In March, the authorities market intervention resulted in a sharp decline of $3.97 billion in reserves within a month, marking the largest decrease since April of last year, which saw a drop of $4.99 billion. However, foreign exchange reserves are influenced by various factors, including market interventions, fluctuations in the value of the dollar, and returns on foreign asset management. As the trend of high exchange rates continues into the second quarter, attention is focused on the scale of net transactions by the foreign exchange authorities. The average won-dollar exchange rate in the second quarter was 1,501.6 won, marking the first time in 28 years and three months that the quarterly average exchange rate reached the 1,500 won level since the first quarter of 1998 during the Asian financial crisis. Details of the foreign exchange market stabilization measures taken in the second quarter will be disclosed at the end of September. Experts attribute the persistent strong dollar phenomenon to the Federal Reserves hawkish stance and robust U.S. economy, along with structural dollar demand driven by increased private overseas asset investments as a major cause of the wons depreciation. Jeon Gyu-yeon, a researcher at Hana Securities, stated, Despite a current account surplus due to strong semiconductor exports, capital outflows through the financial account have increased, keeping the won-dollar exchange rate at a high level. The accumulation of private overseas assets is creating structural dollar demand, exerting downward pressure on the won.* This article has been translated by AI. June 30, 2026 17:00 -
US-Iran Agreement Raises Hopes for Hormuz Strait Reopening, Trade Normalization May Take Months Expectations are rising for the reopening of the Hormuz Strait following a temporary agreement between the United States and Iran. However, experts warn that it may take months for oil and gas trade to return to pre-war levels. Bloomberg reported on June 15, citing key market experts, that the agreement could alleviate concerns over supply disruptions and reduce upward pressure on oil prices. However, it noted that shipping companies, insurers, and refiners will need time to regain trust in the Hormuz route. Haris Kurshid, chief investment officer at Chicago-based Karobar Capital, stated, Just because the strait is reopening doesnt mean trade will normalize immediately. Logistics can resume quickly, but rebuilding trust will take time. Additionally, many importing countries and businesses have secured alternative routes and suppliers during the conflict. With some already having changed their procurement methods, returning to the previous trading structure may prove challenging even if the Hormuz Strait reopens. There are also hurdles to resuming operations. Charu Chanana, chief investment strategist at Saxo Markets, pointed out that mine clearance, shipping insurance costs, port congestion, and geopolitical surprises could slow down oil transportation. Priyanka Sachideva, an analyst at Singapore-based multi-asset broker Phillip Nova, assessed that the economic burden from rising energy prices and some infrastructure damage would not recover quickly. Predictions indicate that oil prices are unlikely to drop significantly in the short term. Tony Sycamore, a market analyst at online trading firm IG Australia, suggested that countries might seek to replenish reduced inventories and strategic reserves following the reopening of the strait. He noted that recent expectations of a price drop have already been largely factored into the market. Lin Tran, a market analyst at online broker XS.com, added that if oil demand remains strong while supply recovery is slower than expected, prices could find support again. The stability of the agreements implementation is also a concern. Chris Weston, head of research at Australian online forex and CFD broker Pepperstone Group, remarked that the US-Iran agreement remains unstable, with issues such as Irans demands for reconstruction support and frozen assets likely to become contentious. Sarah Bakshuri, CEO of energy consulting firm SVB Energy International, noted that importing countries and businesses will increasingly explore alternative logistics and supply sources, indicating a potential for long-term changes. The recovery of trade is expected to occur gradually. Xavier Tang, chief market analyst at energy and shipping data analytics firm Vortexa, explained that once the agreement is finalized and insurers guarantee vessel operations, the movement of empty tankers will increase first, followed by a gradual resumption of oil production and refinery operations. Selena Ling, chief economist at Singapores OCBC Bank, also stated that it will take time for production facilities affected by bombings or shutdowns to return to full operation. June 15, 2026 15:54 -
Government Addresses High Exchange Rates Impacting Livelihoods, Urges Major Exporters to Stabilize Forex Supply The South Korean government has engaged in discussions with major exporters, including Samsung Electronics and Hyundai Motor, regarding the early conversion of export payments and increasing the inflow of overseas retained earnings into the domestic market amid rising exchange rate volatility. On June 11, the Ministry of Economy and Finance and the Ministry of Trade, Industry and Energy held a meeting at the Government Seoul Office with key exporters such as Samsung Electronics, SK Hynix, Hyundai and Kia, HD Korea Shipbuilding & Offshore Engineering, Samsung Heavy Industries, and Hanwha Ocean to discuss recent foreign exchange transaction trends and measures for stabilizing the forex market. Deputy Minister of Economy and Finance Heo Chang noted that recent geopolitical risks in the Middle East and adjustments in foreign investor proportions due to a favorable domestic stock market have contributed to increased volatility in the foreign exchange market. However, he assessed that the external soundness of the South Korean economy remains robust, considering the record-high current account surplus and ample foreign currency liquidity. He cautioned, Despite the solid performance of the real economy, prolonged high exchange rates could increase burdens on businesses and households, potentially hindering domestic recovery and impacting the livelihood economy. He urged exporters to play a role in improving forex supply and reducing volatility, and discussed measures for immediate conversion of export payments and enhancing the inflow of overseas retained earnings. Deputy Minister of Trade, Industry and Energy Moon Shin-hak emphasized the importance of proactive cooperation from companies to minimize the negative impacts of high exchange rates on exports and the economy. He added that the government will make every effort to stabilize the foreign exchange market while enhancing support for companies facing difficulties due to rising raw material prices linked to high exchange rates, including expanding import insurance and preferential loan guarantees. Attending companies expressed that excessive exchange rate volatility is increasing the burden of managing foreign exchange risks and creating management uncertainties, and they pledged to actively cooperate with the governments efforts to stabilize forex supply.* This article has been translated by AI. June 11, 2026 15:03 -
Financial Supervisory Service Targets Forex Market Speculation, Urges Banks to Curb Dollar Marketing Financial Supervisory Service (FSS) has urged banks to refrain from aggressive dollar deposit marketing and to strengthen management of foreign exchange positions in response to increased volatility in the forex market. The FSS will also enhance inspections of speculative forex trading and market disruption activities.According to the financial sector on June 9, the FSS held a meeting on Stabilizing the Forex Market led by Kim Sung-wook, Deputy Director of the Banking and Small Finance Division. The meeting included executives responsible for foreign currency and funding from major commercial banks and foreign bank branches.The meeting aimed to review trends in the banking sector and the foreign currency funding market, as well as to discuss specific responses to the heightened volatility in the forex market.The FSS first advised banks to avoid excessive dollar deposit events or marketing competitions in the current environment of high exchange rate volatility and to enhance consumer guidance regarding the risks of foreign exchange losses.Additionally, the FSS urged banks to refrain from engaging in speculative forex trading that could lead to excessive exchange rate increases and indicated that strict measures would be taken against market disruption activities such as price fluctuations.In particular, the FSS requested banks to actively cooperate to prevent offshore non-deliverable forward (NDF) derivative trading from exacerbating volatility and concentration in the domestic forex market.Furthermore, the FSS decided to shorten the inspection cycle for foreign exchange positions at major banks from monthly to weekly for temporary management and to extend the suspension of enhanced foreign currency liquidity stress test supervision until the end of this year.The FSS plans to jointly inspect speculative trading and market disruption activities that exploit the weakening of the won in collaboration with the Bank of Korea and other relevant agencies.Kim Sung-wook, Deputy Director of the FSS, stated, I urge the banking sector to adhere to trading norms in the forex market and to strengthen internal controls to prevent market disruption activities. We will closely monitor market conditions and implement necessary measures in a timely manner.* This article has been translated by AI. June 9, 2026 16:12 -
Government to Inspect Speculative Trading and Market Disruption in Forex The government is set to conduct inspections of speculative trading and market disruption in the foreign exchange market following a recent surge in the won-dollar exchange rate. On June 9, the Ministry of Economy and Finance held a meeting with market experts from the Bank of Korea and the foreign exchange, securities, and macroeconomic sectors to discuss recent trends in the foreign exchange market and potential responses. During the meeting, participants noted that the fundamentals of the South Korean economy remain strong, citing the upward revision of the first-quarter GDP estimate, a sustained current account surplus, and the activation of the National Pension Services new framework. They expressed the view that the recent concentration in the foreign exchange market is temporary and that volatility is expected to ease in the future. The discussion also covered the status of non-deliverable forward (NDF) transactions and strategies to absorb NDF demand into the domestic foreign exchange market. Director Moon Ji-sung emphasized the need to attract foreign investors NDF demand to the domestic market through 24-hour foreign exchange market operations and an offshore won payment system, thereby enhancing the competitiveness and efficiency of the domestic foreign exchange market. The government has expressed serious concern about the current market situation and reaffirmed its commitment to respond sternly to speculative trading that undermines market order or encourages one-sided movements in the exchange rate. As part of this effort, the government has begun preparations for inspections to determine whether speculative trading and market disruption are occurring in the foreign exchange market. Relevant agencies are set to conduct on-site inspections and examinations this week. The inspections will focus on transactions aimed at disrupting market functions or hindering the price discovery process, as well as large-scale one-sided trades executed at specific times to disadvantage customers. The government plans to closely monitor major trading flows in collaboration with relevant agencies, including the Bank of Korea. Director Moon stated, It is crucial for market participants to play a responsible role in ensuring the stable operation of the foreign exchange market and establishing a sound trading order, and urged each institution to strengthen internal controls and risk management to prevent speculative trading or actions that could disrupt market order.* This article has been translated by AI. June 9, 2026 15:03 -
India enters austerity drive as oil, gold imports strain forex reserves SEOUL, May 12 (AJP) — India’s 1.5 billion people are being asked to travel less, farm more efficiently and, most notably, cut back on gold purchases, underscoring the severity of the blow the three-month-long Middle East energy shock is dealing to Asia’s fastest-growing major economy. In a national address on Sunday, Prime Minister Narendra Modi urged citizens to avoid buying gold for the next year, reduce unnecessary overseas travel and curb energy consumption as the government attempts to contain rising dollar demand amid deepening geopolitical turmoil in the Middle East. “Patriotism is not only about the willingness to sacrifice one’s life on the border,” Modi said in a speech in Hyderabad. “In these times, it is about living responsibly and fulfilling our duties to the nation in our daily lives.” The appeal marked one of Modi’s broadest public austerity campaigns since the Covid-19 pandemic, with the government also encouraging remote work arrangements, greater use of public transportation, carpooling and electric vehicles, while calling on farmers to reduce fertilizer consumption and energy use. Markets increasingly view the measures not as a simple conservation campaign, but as a broader macroeconomic stabilization effort aimed at containing foreign exchange pressures caused by soaring crude oil prices and rising imports. The vulnerability stems from India’s structural dependence on imported energy and gold, both priced in U.S. dollars. As the world’s third-largest crude oil importer after the United States and China, India imported about $123 billion worth of crude oil during the 2025 - 2026 fiscal year, making energy the single largest contributor to the country’s import bill. Gold ranked second, with imports reaching approximately $72 billion during the same period, reflecting India’s position as one of the world’s largest gold-consuming nations. The dual surge in oil and gold demand is intensifying pressure on the current account and the rupee at a time when geopolitical tensions are pushing global energy prices sharply higher. Following the collapse of negotiations surrounding the U.S.-Iran conflict and concerns over the security of the Strait of Hormuz, Brent crude prices climbed above $100 per barrel, heightening fears over inflation and widening external imbalances across Asia’s energy-importing economies. The challenge is particularly acute for India because gold functions not merely as a luxury product, but as a quasi-financial asset deeply embedded in household savings, rural wealth preservation, weddings and inheritance practices. When geopolitical uncertainty and inflation fears intensify, Indian households historically increase gold purchases as a safe-haven store of value, further boosting dollar demand and worsening pressure on the rupee. India’s foreign exchange reserves are already showing signs of strain. According to the Reserve Bank of India, reserves stood at $690.69 billion as of May 1, down sharply from $728.5 billion before the escalation of the Iran conflict in late February. While the absolute reserve level remains among the world’s largest, the pace of depletion has unsettled markets. Reserves fell by roughly $37.4 billion in March and another $7.8 billion in April as the central bank reportedly intervened aggressively to support the rupee through dollar-selling operations conducted via state-run banks. The rupee has lost around 10 percent of its value over the past year, with roughly half of that decline occurring since the outbreak of the Iran conflict and the escalation of regional tensions. The International Monetary Fund projects India’s current account deficit could widen to around $84 billion in 2026, reinforcing concerns that sustained energy shocks may further weaken external balances. India has faced similar external vulnerabilities before. During the 2013 “Taper Tantrum,” when emerging markets were rattled by signals of U.S. monetary tightening, New Delhi stabilized markets by sharply raising gold import duties and imposing restrictions on imports to protect the rupee and conserve reserves. Yet the current policy direction also exposes a paradox at the heart of India’s financial strategy. While the government is urging households to cut gold purchases, the central bank itself has steadily expanded its own gold holdings as part of a broader effort to diversify away from dollar-denominated reserve assets amid growing geopolitical fragmentation. India currently holds roughly 880 tons of gold reserves, ranking seventh globally. Gold’s share of the RBI’s foreign exchange reserves rose from 13.9 percent last September to 16.7 percent at the end of March this year. The RBI has also repatriated more than 100 tons of gold from overseas vaults back to domestic storage over the past year, moves widely viewed as part of a broader effort to strengthen sovereign financial resilience in an increasingly uncertain geopolitical environment. India now finds itself operating within a uniquely contradictory structure in which households are buying gold as protection against instability while the central bank simultaneously accumulates gold as a strategic reserve asset. But with private gold imports continuing to drain foreign exchange reserves and widen current account pressures, analysts expect New Delhi’s campaign to curb discretionary imports and conserve dollar reserves to intensify in the months ahead. May 12, 2026 16:43 -
South Korea's fixated weak won calls for a long-term policy reset SEOUL, December 09 (AJP) - South Korea is running out of quick fixes. With the local currency stuck in the band of 1,470 won per dollar for nearly a month and inflation pressures reawakening, economists say the country can no longer rely on ad-hoc tools, verbal interventions, or temporary tax cuts to stabilize forex. Instead, the entrenched weakness of the won is exposing the need for a fundamental, long-term overhaul of the nation’s macroeconomic, energy-import, and capital-flow policies. The won slipped below 1,470 won on Monday, presumably through interventionist hands. The currency has risen for five straight months—from an average of 1,366.95 won in June to 1,469.48 won in December, a 7.5 percent jump—enough to unsettle inflation that had only recently begun to stabilize. Already, the import price index spiked 1.9 percent in October, the fastest pace since January, pushing domestic supply prices up 0.9 percent. Consumer inflation, at 2.4 percent, risks drifting higher as companies face steeper dollar-denominated input costs and begin passing them on. The Bank of Korea and global investment banks now expect inflation to hover near or slightly above 2 percent next year. When a Weak Won Stops Being a “Phase” The deeper concern is that the weak-won environment may no longer be a passing cycle but the country’s new structural baseline. A Bank of Korea study estimates that if a 10 percentage-point depreciation persists for more than three months, annual inflation rises 1.61 percentage points—a hit that could dull any nascent recovery in private consumption. That emerging pattern is already visible at the small-business level. Even after government-backed spending coupons lifted third-quarter sales by 5.3 percent year-on-year, profits still fell 4.63 percent from the previous quarter because of elevated costs, according to KB Securities. “Domestic demand is improving, but inflation pressure is strengthening in parallel, weakening the elasticity of the recovery,” said economist Ryu Jin-i. She expects consumer prices to peak in the third quarter of next year, pushing the central bank into a difficult trade-off between growth and inflation. Policy Ambiguity Is Becoming Its Own Risk Markets say they cannot tell whether the government sees the won’s weakness as structural or temporary—and that uncertainty is beginning to carry its own costs. Standard verbal warnings about “excessive one-sided moves” have had virtually no effect, largely because foreign inflows remain tepid and dollar demand remains firm. A brief episode involving the National Pension Service’s (NPS) hedging strategy fueled further confusion. Officials suggested higher hedging ratios could stabilize the won by increasing demand for the currency, only to backtrack after public pushback over using pension assets for currency management. Deputy Prime Minister Koo Yun-cheol later stressed that the government had no intention of “mobilizing the pension fund as a temporary tool”—a clarification that left markets questioning the strategic coherence of the policy framework. Other inflation-containment tools—fuel tax cuts, emergency tariffs, and public-fee restraint—have been stretched to their limits. The country’s longest-standing fuel-tax reduction is still in effect. Tariff relief for grains and raw materials has been repeated so often its impact is fading. And public-utility price controls are hard to sustain if the weak-won trend continues. At a recent policy briefing, Presidential Policy Chief Kim Yong-beom outlined three priorities: encouraging the repatriation of Korean companies’ overseas profits, examining retail investors’ overseas investment risks, and reassessing the NPS’s hedging framework. Yet each carries structural tension—tax architecture, capital-market liberalization principles, and pension-fund fiduciary duty—that makes them difficult to execute swiftly. Structural Pressures Mount Behind the Scenes Economists warn that the country’s 40-month run of Korea–U.S. interest-rate inversion continues to siphon funds into higher-yielding foreign assets. “Intervening with ten billion dollars stabilizes the market for a day or two at most,” said Hansung University’s Kim Sang-bong. “These are not fundamental solutions.” Corporate hedging behavior also reflects the shift: currency-risk insurance purchases fell 32.7 percent in the first 11 months of the year, and plunged 45.8 percent in October alone—evidence that companies now see the high exchange rate as the new normal. Meanwhile, Korea’s heavy dependence on imported energy and food magnifies its exposure. A government plan to import 100 billion dollars of U.S. energy over four years diversifies away from the Middle East but raises transportation and logistics costs. Japan and China have aggressively pursued food-supply diversification; Korea’s efforts remain tentative by comparison. Even raw-material reserves are feeling the squeeze. The Public Procurement Service raised its nonferrous metal stockpiling budget to 80 billion won, but the same money now buys less because of rising global prices and the weaker currency. A Moment to Rebuild Fundamentals Although Korea’s current-account surplus—bolstered by a rebound in semiconductor exports—helps cushion capital outflows, economists emphasize that a long-term remedy lies not in patchwork interventions but in reinforcing macroeconomic fundamentals and improving the domestic investment environment. “Instead of relying on short-lived measures, it is time to redesign the policy framework from the ground up,” said Seoul National University economist Ahn Dong-hyun. “Korean companies are investing more abroad than they are reshoring. Regulatory improvements and a stronger domestic base are essential to reversing that trend.” For now, the won remains pinned near 1,470 won per dollar—an indicator not just of currency markets but of a broader strategic question: whether Korea’s policymakers can shift from crisis response to a durable, forward-looking policy architecture that prevents the weak-won, high-inflation cycle from becoming a structural feature of the economy. * This article, published by Aju Business Daily, was translated by AI and edited by AJP. December 9, 2025 07 -
Underperformance of KRW exposes fragility of economy overly exposed to USD and chips SEOUL, November 10 (AJP) - South Koreans involved in trade settlements or overseas spending may need to brace for the U.S. dollar staying above 1,400 won for an extended period, as structural vulnerabilities in the Korean economy and a strong preference for dollar-denominated assets continue to undermine the local currency. The dollar eased to 1,451.50 won on Monday after briefly topping 1,460 late last week — its highest since last April when the country grappled with the presidential impeachment process and tariff threats that escalated under U.S. President Donald Trump. Despite a broadly steady greenback, the Korean won lost nearly 2 percent last week, marking the steepest decline among major currencies. The dollar index edged up just 0.15 percent. The euro strengthened 0.23 percent against the dollar, the yen 0.33 percent, and the pound 0.11 percent. Even currencies that weakened — the Swiss franc (-0.10%), Swedish krona (-0.42%) and Canadian dollar (-0.14%) — fell far less than the won. The immediate catalyst for the won’s sharp slide was heavy foreign selling of Korean equities. Overseas investors offloaded 7.26 trillion won ($5.2 billion) worth of shares on the Korea Exchange between Nov. 3 and 7 — the largest weekly net outflow on record. The amount exceeded the entire October outflow of 5.34 trillion won and almost erased September’s 7.44 trillion won net inflow. The Kospi, which had broken above 4,200 earlier this month, quickly reversed as foreigners dumped chipmakers amid renewed concerns over an AI-driven overvaluation. The selloff added further downside pressure on the won. Another source of structural depreciation is Koreans’ powerful appetite for overseas securities. Between January and September, Korean residents invested $99.85 billion in foreign stocks and bonds — more than triple the $29.65 billion that foreigners poured into Korean securities. Although Korea posted a large current account surplus of $82.77 billion in the first nine months, outbound net assets — driven by direct and portfolio investment — reached $80.99 billion, nearly offsetting the surplus. The promise of government-driven direct investments in the U.S., capped at $20 billion annually as part of a bilateral trade deal, means further outflow. “It’s the substantial outflow of dollars for financial investment,” said Kwon Ah-min, a researcher at NH Investment & Securities. “That’s the only clear direct explanation, given that current-account and capital-market conditions are otherwise favorable.” She added: “The dollar globally is softening, the yuan is strong, and trade conditions are favorable — yet the dollar-won rate hasn’t dropped. That tells the story.” Kwon said a move toward the 1,500 level cannot be ruled out, though it is unlikely this year. “When the rate hit 1,485 earlier this year, Treasury yields were at 4.5 percent and tariff risk was higher. Now yields are more stable and the Fed tone is relatively dovish.” She noted that authorities would likely prevent a break above 1,500, using National Pension Service hedging bands around 1,470–1,480 and conducting smoothing operations if needed. Market consensus is divided on whether the pair will test 1,500 — but most agree that a return below 1,400 will be difficult. The forex market has stabilized somewhat on expectations that the 40-day U.S. federal government shutdown — the longest in history — may soon end. But the relief is likely temporary, analysts say, because the won’s fragility is rooted in Korea’s over-reliance on semiconductor exports and susceptibility to U.S.-driven tariff and policy risks. “It’s no longer a situation that can be controlled by domestic factors,” said Cho Yong-ku, an analyst at Shinyoung Securities. “Stabilization depends on the dollar index easing and foreign funds returning.” Cho added that a Fed rate cut, if it comes, could slow the pace of depreciation, but would not resolve structural vulnerabilities. November 10, 2025 1