Key Moments
- Korean authorities introduced new steps to support the KRW, including tighter oversight of offshore FX derivatives and stronger monitoring of market misconduct.
- The National Pension Service increased its FX hedging through USD forward selling, although the impact may remain limited against ongoing foreign equity outflows.
- Commerzbank’s Charlie Lay said lasting KRW strength will depend on lower capital outflows and steady policy execution.
Authorities Move to Support the Won
South Korean policymakers have launched new measures to support the Korean Won (KRW). According to Commerzbank strategist Charlie Lay, the plan includes stricter oversight of offshore FX derivatives and closer monitoring of suspected market misconduct.
In addition, the National Pension Service (NPS) has expanded its FX hedging program through USD forward selling. These actions aim to reduce volatility and improve confidence in the currency market.
However, Lay noted that long-term KRW strength will depend on broader market trends. In particular, policymakers need to slow portfolio outflows and follow through on their commitments.
Financial Regulators Coordinate Response
The government announced the measures after an emergency meeting involving South Korea’s key financial authorities.
Officials from the Ministry of Economy and Finance, the Bank of Korea (BoK), the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS) took part in the discussions.
As a result, regulators will monitor offshore FX derivative trading more closely. They will also increase checks on suspicious market activity. These steps aim to limit excessive swings in the won.
NPS Hedging May Offer Limited Support
The National Pension Service has increased USD forward selling to hedge foreign currency exposure. This move could provide some support for the KRW.
Even so, Lay believes the effect may be limited. Recent foreign equity outflows remain much larger than the scale of the hedging program.
Therefore, the strategy may help stabilize the currency but is unlikely to reverse market trends on its own.
Capital Outflows Remain a Key Challenge
Recent weakness in the Korean Won mainly reflects capital flow trends. Foreign investors have reallocated funds, while domestic retail investors have also moved money abroad.
Consequently, pressure on the KRW has increased despite government efforts to support the currency.
Finance Minister Koo Yun-cheol stressed that authorities remain alert. He said officials will monitor markets around the clock and act quickly if conditions worsen.
Summary of Policy Actions
| Measure | Objective | Expected Impact |
|---|---|---|
| Tighter oversight of offshore FX derivatives | Improve market monitoring | May reduce excessive volatility |
| Closer scrutiny of market misconduct | Protect market integrity | Could strengthen investor confidence |
| Expanded NPS USD forward selling | Support the KRW | Likely modest compared with capital outflows |




