The exchange rate of the US dollar against the South Korean won is approaching the red line of 1500! The South Korean authorities may intervene forcefully to defend the local currency.

Some analysts point out that if the South Korean won falls to the important psychological level of 1 USD to 1500 KRW - the highest level since 2009, the South Korean authorities may increase efforts to defend the won. Minhyeok Lee, an economist at the Bank of Korea, stated that the state-owned National Pension Service (NPS) has resumed selling US dollars to support the won, and once the USD to KRW exchange rate approaches the range of 1480 to 1500, the institution may intervene more actively. At the time of writing, the USD to KRW exchange rate was at 1471.55. Due to continuous selling of domestic stocks by foreign investors and increased overseas investments by residents, the Korean won has depreciated by over 4% since the fourth quarter. This puts pressure on the South Korean authorities to defend their currency. Korean government officials have expressed concerns about the increasing uncertainty in the foreign exchange market, stating that the continued imbalance in overseas investments by residents could strengthen expectations of a weaker won, and agree that it is necessary to actively utilize all available tools to counter this. In response to the rapidly changing foreign exchange market situation, several departments of the South Korean government held an emergency meeting on November 24 to discuss specific measures to stabilize the market. According to reports, the meeting was led by the Ministry of Finance, with the participation of the Bank of Korea, the Ministry of Health and Welfare, and the National Pension Service. The meeting focused on how to effectively alleviate the pressure of the won's depreciation and assess possible intervention measures. While the significant depreciation of the won may benefit export companies to some extent, it also exacerbates the pressure of rising import costs, potentially leading to higher domestic inflation, especially in essential goods such as energy and food, forming a transmission effect. Against the backdrop of increasing divergence in global monetary policies and rising geopolitical economic uncertainties, the policy challenges facing Korean financial authorities have significantly increased. As the largest institutional investor in South Korea (holding approximately $545 billion in overseas assets), the National Pension Service Fund often helps alleviate the pressure of won depreciation through hedging and foreign exchange operations. For example, the institution sold US dollars and bought Korean won from January to May of this year. EJ Ethan Seo, Global Markets Director at the Seoul branch of BNP Paribas, said, "Recent reports on the NPS' forex hedging seem to have had a signaling effect on the market. The general belief in the market is that the South Korean authorities will defend the 1500 level." The National Pension Service Fund has set its hedging ratio limit at about 15% of its global assets and executes it through various methods including selling US dollar forward contracts. In the latest round of USD selling, the fund used its tactical hedging plan, allowing it to hedge up to 5% of its overseas assets. Gyeong-won Min, an economist at Woori Bank, stated that with liquidity tightening towards the end of the year, expectations for year-end foreign exchange management by Korean authorities are rising, and "the fund's hedging operations may carry some weight".