Building on December 24's verbal intervention that spurred a sharp rebound, the Korean won still ranked fifth weakest among 42 major currencies in Q4 2025 with a 3.3 percent drop against the USD. Persistent foreign outflows and overseas investments continue to weigh on the currency.
The Korean won depreciated 3.3 percent against the U.S. dollar in Q4 2025, ranking fifth weakest among 42 currencies tracked by the Bank of Korea. It followed the Argentine peso (-6.8%), Japanese yen (-5.1%), Brazilian real (-3.7%), and Taiwanese dollar (-3.3%). This occurred despite the strong verbal intervention on December 24, which led to the won's biggest one-day gain in over three years, closing at 1,449.8 after surging 33.8 won.
Persistent pressures stem from net foreign selling of domestic stocks, ramped-up overseas investments by the National Pension Service (NPS)—adding 70 trillion won to reach 771 trillion won (58% of assets)—and individuals (32 billion USD net U.S. stock buys amid AI boom). Corporate overseas retained earnings grew 7.8 billion USD (up 40.2%). Derivatives betting on a stronger dollar added to volatility. The Bank for International Settlements pegged the won's real effective exchange rate at 87.05 last month, the lowest since 2009's 85.47, signaling undervaluation that aids exports but hikes import costs.
Shinhan Bank's Baek Seok-hyun warned, "Unless domestic stock market appeal rises, won weakness may persist long-term." Woori Bank's Im Hwan-yeol urged stronger defense, saying inflows to local stocks are needed to halt depreciation. Responses include tax incentives for reshoring, NPS currency hedging, and prior stabilization measures like eased bank rules and FX monitoring.
