South Korea signalled tolerance for FX volatility, saying the won should strengthen toward 1,400 as authorities work to stabilise markets.
Summary:
South Korea says it lacks immediate FX stabilisation tools.
Lee stresses FX markets are driven by supply and demand.
Won moves broadly aligned with yen, but has weakened less.
Authorities see the won strengthening toward 1,400.
Government pledges to work toward FX market stability.
South Korea’s president said authorities are working to stabilise the foreign exchange market but acknowledged that domestic policy tools alone are insufficient to fully address currency pressures, as the won remains sensitive to broader regional and global dynamics.
Speaking on Wednesday, President Lee said Seoul would already have deployed FX-stabilising measures if they were available, underscoring the limits policymakers face in directly countering recent currency volatility. He stressed that the foreign exchange market ultimately operates on supply and demand fundamentals, signalling caution against expectations of aggressive or unilateral intervention.
Lee noted that recent moves in the Korean won have broadly tracked developments in the Japanese yen, reflecting shared exposure to global dollar strength and regional capital flows. However, he argued that the won has weakened by less than the yen during the latter’s recent decline, suggesting relative resilience in Korea’s currency performance.
Importantly, the president said South Korean foreign exchange authorities expect the won to strengthen toward the 1,400 level in the near term, offering reassurance to markets after periods of elevated volatility. He added that the government would continue working to stabilise FX conditions, while recognising that external forces, including US monetary policy and global risk sentiment, play a dominant role.
The comments highlight the delicate balance facing South Korean policymakers as they seek to manage currency stability without distorting market signals or exhausting limited intervention capacity. With Asia-Pacific currencies under pressure amid shifting expectations for US interest rates, Seoul appears focused on communication and coordination rather than direct market action.
Lee’s remarks also echo a broader regional theme, where authorities have increasingly framed FX moves as externally driven and linked to the dollar cycle rather than domestic fundamentals. By emphasising alignment with the yen and relative outperformance, the administration appears keen to counter perceptions of idiosyncratic weakness in the won.
For markets, the messaging suggests a tolerance for near-term volatility but a preference for orderly adjustment, with officials relying on verbal guidance and macro coordination rather than immediate stabilisation measures. The explicit reference to a stronger won near 1,400 may also act as a soft signal to discourage one-way speculative positioning.
