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Korea's central bank may intervene in forex as the won depreciates rapidly against the dollar.

TraderKnows
TraderKnows
06-19

Since the beginning of this year, the Korean won has rapidly depreciated by 6.5%. This significant devaluation has caught the attention of the Bank of Korea; however, they have not yet decided to intervene.

According to two sources involved in policy discussions, South Korea's foreign exchange regulator views the 1,385 won-to-dollar exchange rate as a crucial defense line. They conveyed this view to Reuters on Tuesday and mentioned some recent measures taken to prevent the won from depreciating further.

The Bank of Korea and the Ministry of Finance are prepared to intervene in the USD/KRW spot market at the end of May if the won/dollar exchange rate breaches the 1,385 level, the sources said, requesting anonymity due to the sensitivity of the matter.

One of the sources mentioned that officials are monitoring whether the won will depreciate beyond 1,385 to determine the precise timing of measures to support the currency.

The rapid depreciation of the won against the dollar this year has troubled policymakers in Asia's fourth-largest economy, with the won down 6.5% so far.

On Wednesday, the won/dollar exchange rate was around 1,381.6.

On May 31, the Ministry of Finance stated that the Bank of Korea and the National Pension Fund are discussing increasing their $3.5 billion foreign exchange swap limit. This plan would allow the fund to borrow from the central bank's foreign exchange reserves instead of purchasing dollars in the domestic money market.

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