Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Korean currency strengthens at steepest pace in 3 years after authorities' intervention
An electronic trading board at Hana Bank headquarters in central Seoul shows the won-dollar exchange rate falling after financial authorities’ intervention, Wednesday. The Korean currency closed at 1,449.8 won per dollar. Yonhap
By Yi Whan-woo
Gov't offers temporary tax exemption to bring overseas investments back home
The Korean currency slowed its freefall, closing at 1,449.8 won per dollar in daytime trading, Wednesday — improving by 33.8 won from the previous day’s close and hitting the strongest pace of gain in more than three years — following authorities’ verbal intervention to curb volatility reminiscent of past financial crises.
The gain of 33.8 won was the steepest since Nov. 11, 2022, when the local currency climbed by 59.1 won against the dollar.
This rebound came after officials from the Ministry of Economy and Finance and the Bank of Korea (BOK) jointly issued a statement, as the won-dollar exchange rate had surged to the 1,480 level earlier this week.
The closing rate was at 1,480.10 won on Monday and again 1,483.6 won on Tuesday, marking the first time since 2009 during the global financial crisis that the exchange rate ended two consecutive days in the 1,480 range. The exchange rate also opened at 1,484.9 won on Wednesday.
Under the circumstances, the joint statement said, “An excessive weakness of the won is not desirable, and the market will soon see the government’s strong commitment and its capacity for comprehensive policy execution.”
The statement echoed presidential chief of staff for policy Kim Yong-beom's remarks earlier in the day.
“Things will be somewhat different starting today. Various policies, including measures to stabilize the exchange rate, will be implemented, so please watch closely for the time being,” he said.
Kim compared the volatility to a “strong current” in a river, where the water flows strongly due to shallow depth or a narrow passage.
“We are now passing through it. We need to be careful, but we have sufficient measures to navigate safely,” he said.
Regarding suggestions to pursue a Korea-U.S. currency swap to address dollar supply imbalances, Kim firmly dismissed the idea, saying, “It is not under consideration by the government.”
He added, “Even without measures like a currency swap, the foreign exchange market can regain stability sufficiently.”
Shortly after the joint statement, the finance ministry also announced a temporary tax exemption for Korean retail investors in the U.S. stock market.
These investors set a record with $32 billion in net purchases of U.S. stocks, supported in part by the artificial intelligence boom, and are considered a group that accelerates dollar outflows and the won’s depreciation.
To encourage repatriation of their investment funds, the ministry said capital gains tax will be exempted for up to 50 million won ($34,400) of the sale amount for one year if they sell foreign stocks and invest in domestic stocks instead.
The plan follows a string of measures aimed at curbing the won’s slide, involving other parties such as export-oriented companies and the National Pension Service.
Regarding financial authorities’ efforts, economists said they appear to be as determined as ever, even compared with the financial crises.
“The level of verbal intervention and measures taken is noteworthy,” said Shin Se-don, professor emeritus of economics at Sookmyung Women’s University.
Speaking on condition of anonymity, another economics professor said, “The authorities’ strong efforts reflect the serious nature of the situation, similar to past crises.”