The government made a verbal intervention around the time domestic foreign exchange market transactions began on the 24th, sending a message that "an excessive weakening of the won is undesirable." The won-dollar exchange rate opened at 1,484.9 won, up 1.3 won, then fell more than 26 won intraday after the government's verbal intervention, dropping into the 1,450-won range.
At 9:01 a.m. that day, the government sent a message to the press corps in the names of Kim Jae-hwan, director general of the International Finance Bureau at the Ministry of Economy and Finance, and Yoon Kyung-soo, director general of the International Department at the Bank of Korea.
The government said, "You will soon see that holding a series of meetings over the past one to two weeks and the measures released by each ministry and agency were part of organizing the situation to show the government's strong resolve and comprehensive capacity to execute policy."
Observers said the day's verbal intervention message was stronger than what the government had previously released. Earlier, Koo Yun-cheol, Deputy Prime Minister for the economy and Minister of the Ministry of Economy and Finance, had sent messages such as "We are concerned about the situation in which uncertainty is expanding in the foreign exchange market," and "An excessive weakening of the won is undesirable." On this day, the government used strong wording in its message, including "strong resolve" and "comprehensive execution capacity." A foreign exchange market official said, "It appears the government intends to use any policy to stabilize the exchange rate."
The won-dollar exchange rate has steadily risen in the second half. It was in the 1,300-won range in June and recently topped 1,480 won. In response, the Ministry of Economy and Finance formed a "four-party consultative body for exchange rate stability" with the Bank of Korea and the National Pension Service last month and continued to release a series of measures to lower the exchange rate. However, as the upward trend in the exchange rate persisted, the government carried out a high-intensity verbal intervention on this day.
The government also said that if Korean retail investors trading U.S. stocks return to the domestic stock market, capital gains tax will be temporarily exempted. The government sees one reason for the rising exchange rate as the surge in overseas stock investments by domestic investors. In this process, because they have to sell won and buy dollars, the exchange rate goes up. Accordingly, it plans to induce a return to investing by cutting taxes for those who invest in domestic stocks.