South Korea's top financial officials are pushing back against the won's relentless slide, arguing the currency's weakness doesn't reflect the country's underlying economic strength. Deputy Finance Minister Moon Ji-sung said the dollar-won exchange rate is "misaligned with economic fundamentals," even after the won touched its lowest level since March 2009.
The comments come as policymakers roll out structural changes to the foreign exchange market, including 24-hour onshore spot trading in dollar-won, and signal that exporters may begin converting dollar holdings back into won later in 2026. The won strengthened 0.35% to 1,504.2 per dollar following Moon's remarks.
Why the Won Is Under Pressure
The won has been caught in a global wave of dollar strength, which has pushed down currencies across Asia. A strong US dollar, driven by higher US interest rates and a resilient American economy, has made it more expensive for investors to hold emerging-market currencies like the won.
At the same time, foreign investors have been selling South Korean stocks, adding to the downward pressure on the currency. The combination of a robust dollar and capital outflows has overwhelmed the won, even as South Korea's export sector remains strong and companies hold sizable dollar cash piles.
Moon's point is that the won's deep discount doesn't match the country's economic picture. South Korea runs a trade surplus, meaning it exports more than it imports, which typically supports a currency. Companies also hold large dollar reserves, which could be converted back into won to provide support.
New Market Structure, New Risks
Beyond jawboning, South Korea is changing the plumbing of its foreign exchange market. The launch of 24-hour onshore spot trading in dollar-won is a significant shift. Previously, trading was limited to local hours, which could lead to sharp price jumps when markets opened or closed.
With round-the-clock trading, pricing should become more continuous and less prone to sudden gaps. This can help narrow the gap between onshore pricing and offshore positioning, reducing opportunities for speculative bets that exploit time-zone differences.
Moon also said that officials have "ample room to stabilize" the market, a clear warning to traders betting against the won. The risk of intervention becomes harder to time, which can discourage leveraged one-way bets. The near-term tells will be whether volatility cools and whether onshore and offshore prices stay aligned, with 1,504.2 now a visible level where policy sensitivity may matter as much as day-to-day flow.
What It Means for Investors
For everyday investors, the won's slide has implications beyond currency markets. A weaker won makes South Korean exports cheaper for foreign buyers, which can boost earnings for companies like Samsung and Hyundai. But it also makes imports more expensive, potentially feeding into domestic inflation.
Investors holding South Korean stocks or bonds should watch the won's direction closely. A sustained decline can erode returns for foreign investors when they convert back into their home currency. Conversely, if the won stabilizes or strengthens, it could provide a tailwind for Korean assets.
The broader context is that currency markets are being shaped by global forces beyond any single country's control. The US dollar's strength has been a dominant theme, as seen in recent moves in the dollar edging higher ahead of jobless claims and Fed speakers, while the yen has bucked the trend. Similarly, the pound hit a four-week high near $1.34 as oil retreat and dollar weakness shifted rate expectations.
South Korea's move to 24-hour trading is part of a broader trend of market modernization across Asia. It aims to make the won more liquid and less vulnerable to sudden shocks. But it also means that currency volatility could become more continuous, requiring investors to stay alert around the clock.
Looking Ahead
The key date to watch is the second half of 2026, when Moon expects exporters to start converting some of their dollar holdings back into won through foreign-exchange forwards. That could provide a steady source of demand for the won, helping to support its value.
In the meantime, the won's fate will depend on the interplay between global dollar strength, foreign investor sentiment, and South Korea's policy response. The government's message is clear: it sees the current exchange rate as out of line with fundamentals and is prepared to act. Whether that will be enough to stem the slide remains to be seen.
For investors, the takeaway is that currency risk is an important factor in any international portfolio. The won's recent weakness is a reminder that even strong economies can see their currencies come under pressure from global forces. Diversification and hedging can help manage that risk, but no strategy is foolproof.
