The U.S. government has kept South Korea on its currency monitoring list.
According to a semiannual currency report submitted to Congress by the U.S. Treasury on July 23, South Korea is included in the list alongside China, Japan, Taiwan, Singapore, Vietnam, and Germany. A total of 10 countries were listed, the same as in the January report.
The Treasury evaluates major trading partners based on their trade surpluses with the U.S., the balance of payments from international transactions, and government intervention in currency markets. South Korea met two criteria: a trade surplus with the U.S. and a current account surplus.
Last year, South Korea's current account surplus was 6.6% of its gross domestic product (GDP), an increase from 5.3% in 2024, driven by rising exports of technology products, including semiconductors.
However, the value of the won has weakened. The Treasury noted, “While dollars flowed into the country from exports, significant overseas stock investments by the National Pension Service and individual investors led to a substantial outflow of dollars.”
The increase in overseas stock holdings by the government sector, including the National Pension Service, surged from $8 billion in 2024 to $41 billion last year. The Treasury assessed that “a significant portion of these investments were not hedged against currency fluctuations, increasing downward pressure on the won.”
Investments in overseas stocks by financial companies and individuals also more than doubled, rising from $34 billion in 2024 to $73 billion last year. Individual investors alone purchased over $30 billion in overseas stocks last year.
To buy overseas stocks, investors must convert won to dollars. An increase in overseas stock investments raises demand for dollars, which can exert downward pressure on the value of the won.
South Korea's foreign exchange authorities intervened in the market to prevent a rapid decline in the won's value. The Treasury reported that “Korean authorities net sold $28 billion in the foreign exchange market last year, with $22.5 billion concentrated in the fourth quarter when the exchange rate surged.”
The Treasury emphasized that these measures were not intended to artificially lower the value of the won but were responses to reduce sharp fluctuations in the exchange rate.
South Korea was removed from the currency monitoring list in November 2023 but was reinstated in November 2024 and has maintained its status since then.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.