The won-dollar exchange rate, which had surged into the 1,430-won range due to U.S.-China trade tensions, fell into the 1,420-won range on the 13th after a joint verbal intervention by the foreign exchange authorities.
On this day, the won-dollar exchange rate closed at 1,425.8 won on the Seoul foreign exchange market, up 4.8 won from the previous transaction day. After opening at 1,430 won, the won-dollar rate soared to as high as 1,434.0 won within one minute, then dropped to as low as 1,425 won just five minutes later, showing extreme volatility.
However, the additional upside was limited by the authorities' verbal intervention. The Ministry of Economy and Finance and the Bank of Korea said in a statement that they are "closely monitoring with caution the possibility of one-sided moves in the market as the won's volatility expands," as they launched a joint verbal intervention.
This verbal intervention was carried out for the first time in about one year and six months since April last year. As the won's volatility has recently expanded due to domestic and external factors, it is interpreted that the authorities moved to respond. Unlike actual intervention, in which authorities buy and sell their dollar holdings, verbal intervention is a policy tool that eases exchange-rate volatility through a message that they will step into the market.
The latest rise in the exchange rate was largely influenced by escalating tariff tensions between the United States and China. President Trump said he will impose an additional 100% tariff on China and control exports of key software starting Nov. 1. With U.S. tariffs on China currently averaging 55%, they would expand to about 155% starting in November.
However, some analysis suggested there was still room for talks after President Trump delivered a somewhat conciliatory message on the 12th. At the time, Trump said on his social media Truth Social, "Don't worry about China. Everything will be fine," adding, "The United States is not trying to hurt China but to help."
Min Kyung-won, a researcher at Woori Bank, said, "As for the won, it tends to react sensitively to the trade war and a pullback in risk appetite, so the pressure toward weakness will grow," adding, "With the 1,420-won level breaking and offshore long play (dollar buying) primed over the holiday joining in, it could lead to an expansion of intraday upside volatility."