Finance Minister Koo Yun-cheol mentioned that the government would intervene with firm measures in case there is excessive volatility in the foreign exchange market, as the Korean won is showing further decline against the US dollar.
"The won tends to react more sensitively compared with other currencies," the minister says.
"We will take decisive action if volatility expands excessively," he added, stressing that FX authorities are also closely monitoring speculative trading and one-sided market movements.
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The rapid drop in the value of the won has led to the creation of a collaborative group by the Ministry of Economy and Finance, the Bank of Korea, the National Pension Service (NPS), and the Ministry of Health and Welfare.
He stated that the recently established organization's goal is to establish basic strategies to guarantee consistent pension payments while also maintaining the profitability of the NPS, and there will be additional talks on possible reforms in the medium to long run.
The NPS, which is the third largest pension fund globally, has an expanding international investment portfolio.
This has been identified by market participants as one of the reasons for the local currency facing pressure.
He also mentioned that if an increase in foreign investment in the short run causes inflation or a decrease in buying power, leading to a drop in actual income, one must take into account the possible adverse impacts on the local economy and the well-being of the public.
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Some experts have suggested that the talks might involve urging the NPS to implement more proactive currency hedging tactics, like divesting a portion of its overseas assets denominated in dollars in the event of a significant depreciation of the won.
Koo mentioned that when asked about any concerns raised by the US Department of the Treasury, he noted that the US authorities also appear to desire stability in the domestic FX market.
In its most recent report released in June, the Treasury Department continued to include Seoul on its list of countries to be monitored for their foreign exchange policies. According to the report, the NPS has been increasing its foreign assets and has a $65 billion swap line with the Bank of Korea and other financial authorities.
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This indicates that it could be seen as a means of intervening in the currency market. Korea has not been labeled as a currency manipulator, but it has been included on the watchlist since November 2024.
Koo stated that measures to encourage exporters to exchange their US dollar holdings for Korean won could be considered if necessary. The local currency bounced back against the US dollar, following a recent drop to its lowest point since April.