South Korea's foreign exchange authorities sold a net $22.47 billion (approximately 34 trillion won) in the market during the fourth quarter of last year to defend the won, marking the largest quarterly net dollar sale on record.
According to "market stabilization measures" data released by the Bank of Korea (BOK) on Wednesday, the authorities net-sold $22.467 billion in the foreign exchange market in Q4 2024. The figure is the largest since the central bank began publishing the data in 2019, far exceeding the previous record of $17.54 billion in net sales set in the third quarter of 2022.
The foreign exchange authorities typically intervene by buying and selling dollars from their reserves when exchange rate volatility becomes excessive. When the won-dollar exchange rate surges, they sell dollars into the market to bring the rate down. Conversely, when the rate drops sharply, they sell won and buy dollars.
"In the fourth quarter of last year, the volume of funds flowing in and out through residents was large compared to the current account surplus," said Yoon Kyung-soo, director general of the International Department at the BOK. "The supply-demand imbalance was so severe that the exchange rate rose, which in turn increased the scale of market stabilization operations."
The won-dollar exchange rate stood in the low 1,400 range early in Q4 last year before soaring to the 1,480 level by year-end, fueling speculation that the authorities had carried out large-scale direct intervention. The latest disclosure confirmed those suspicions. After the martial law crisis in December 2024, the authorities have been selling dollars from their reserves to curb the rising exchange rate for five consecutive quarters since Q4 2024.
Experts estimate that a substantial volume of dollar-selling intervention also took place in the first quarter of this year. The won-dollar rate, which had retreated to the 1,420 level earlier this year, climbed again and breached 1,500 triggered by the U.S.-Iran conflict, reaching its highest level since the global financial crisis.
"Recently, we have been closely monitoring the foreign exchange market as outflows of foreign equity investment funds have been significant on the supply-demand side," Yoon said. "If market sentiment and herd behavior become pronounced and the divergence from other currencies widens, we will respond." The remarks amounted to a de facto verbal intervention.
