South Korea has intensified its verbal intervention to counter the depreciation of the won against the US dollar, cautioning that authorities will take "decisive action when necessary" to stabilize the currency.
The Ministry of Economy and Finance and the Bank of Korea stated in a joint text message to reporters on Friday that they are closely monitoring the US dollar-won exchange rate, describing recent movements in the won as "excessive relative to economic fundamentals."
The won fell as much as 0.7% on Friday to 1,519.35 per US dollar, marking it as the worst-performing currency in Asia for the day. Following the release of these comments, the won briefly pared some losses but subsequently resumed its decline. This marks the first instance of verbal intervention via text message since December of last year.
"Authorities are sending warning signals to prevent excessive short positions on the won," said Shaun Lim, a foreign exchange strategist at Maybank. "They become more concerned when clear signs of weakness emerge in the won."
Late last year, the South Korean government employed verbal interventions, dollar sales, and other stabilization measures to prevent the won from breaching the key level of 1,500 per US dollar. However, these efforts proved short-lived. Amid the oil shock triggered by the Iran conflict, the won fell to 1,536.95 per US dollar on March 31, its lowest level in 17 years.
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