Nikkei: South Korea seen intervening to support won amid US trade deficit concerns

South Korea's foreign exchange authorities are believed to have intervened in currency markets around the same time as US and Japanese authorities moved to buy yen, with concerns over America's still-large trade deficit with South Korea seen as a key driver, Japan's Nikkei newspaper reported Thursday.

US and Japanese authorities intermittently bought yen and sold dollars to push up the yen's value starting Thursday. Some market analysts have suggested South Korea's foreign exchange authorities made similar won-buying, dollar-selling moves around the same time. South Korean authorities have not officially confirmed any intervention.

If the won-buying intervention did take place, the Nikkei said the backdrop was a US trade deficit with South Korea that has roughly doubled over the past decade.

Last year, the US trade deficit with South Korea reached $56.48 billion. With AI investment expanding, South Korea's exports to the United States — the country is a major supplier of memory chips — are expected to grow further.

Mizuho Bank economist Hori Takahiro said the intervention appeared to reflect US concerns that a weak won would widen the trade deficit further.

Some analysts in Japan suggested South Korea, whose foreign exchange reserves are about one-third the size of Japan's, may have deliberately timed its moves to ride the coattails of Japan's intervention and maximize the effect.

The Nikkei also noted that downward pressure on the won-dollar rate intensified after SK Hynix converted part of the $26.5 billion it raised through a US American depositary receipt listing, prompting other South Korean exporters to rush to sell their dollar deposits as well.

Nomura Securities analyst Guo Ying, who covers foreign exchange and Asia economics and strategy, said the won could strengthen further, riding improving South Korean economic fundamentals and the momentum of coordinated US-Japan intervention.

Meanwhile, the won-dollar rate fell as low as 1,415 won during trading Thursday, its lowest level in about 10 months. Analysts say the rate could drop below 1,400 won as the dollar supply situation that had weighed on the won improves and the interest rate gap between South Korea and the United States narrows following the Bank of Korea's benchmark interest rate hike.