Deputy PM Koo vows zero tolerance for excessive won volatility

Deputy Prime Minister and Finance Minister Koo Yun-cheol signaled a firm response Sunday to the recent surge in the won-dollar exchange rate, saying authorities would not tolerate excessive volatility or one-sided moves in the currency market.

Koo made the remarks while chairing an emergency joint market monitoring meeting with financial regulators at the Korea Federation of Banks building in Jung-gu, Seoul. "Excessive exchange rate volatility, as seen recently, is not desirable for our economy," he said.

Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eok-won and Financial Supervisory Service Director General Lee Chan-jin attended the meeting.

Officials assessed that the won-dollar rate had risen sharply over the weekend, reflecting heightened tensions in the Middle East and expectations of further US interest rate increases. The won has recently surged to around 1,560 per dollar.

Participants agreed that while recent volatility was partly driven by foreign investors rebalancing their portfolios and taking profits amid a strong domestic stock market, some speculative trading had accelerated the one-sided moves.

The agencies agreed to mount a coordinated response. Officials said offshore non-deliverable forward (NDF) derivative trading was fueling one-sided pressure on the won, and pledged to analyze the flows closely and improve NDF transaction transparency. They also plan to develop measures to bring offshore NDF trading into the domestic foreign exchange market.

The Bank of Korea and the Financial Supervisory Service will conduct inspections to check for market-disrupting activity behind the won's weakness and take strict action where warranted.

A dedicated task force on illegal foreign exchange transactions will also investigate whether import and export companies are engaging in unlawful practices — such as accelerating import payments or excessively delaying the receipt of export proceeds — to exploit the rising exchange rate.

Koo warned that market volatility could flare again depending on how the war in the Middle East unfolds and on US inflation trends. "We will monitor market conditions around the clock with a heightened sense of alert and work with relevant agencies to swiftly implement the measures drawn up today," he said.