Foreign Exchange
US Treasury keeps South Korea on currency monitoring list
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The US Treasury Department announced on Thursday (local time) that it is keeping South Korea on its foreign exchange monitoring list. The report assesses that the recent weakness of the Korean won does not align with the country's strong economic fundamentals and views it as excessive depreciation. The South Korean government plans to maintain close communication with the US to ensure market stability.
Purchases of the U.S. dollar have lessened in South Korea following a surge late last year prompted by expectations of further Korean won weakening, industry sources said. The trend reversal stems from foreign exchange authorities' stabilization measures, including temporary capital gains tax exemptions.
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The South Korean government announced on January 20, 2026, temporary tax incentives for retail investors selling overseas stocks this year and reinvesting in domestic assets. The measure aims to address capital outflows by domestic investors that have contributed to the depreciation of the Korean won against the U.S. dollar.
South Korea's foreign exchange authorities have agreed with the National Pension Service to extend their $65 billion currency swap deal by one year. The arrangement, set to run through the end of 2026, aims to stabilize the forex market. This move comes amid recent weakening of the won against the U.S. dollar.
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Dollar deposits by companies at local banks rose at the fastest pace of the year in November despite a strengthening U.S. dollar. Outstanding balances at five major commercial banks reached $53.7 billion as of Thursday, up 21 percent from $44.3 billion a month earlier. The surge reflects firms' accelerated efforts to bolster dollar holdings amid rising U.S. investments and foreign exchange uncertainties.