Amid observations that South Korean foreign exchange authorities may have intervened in the market to boost the value of the won around the same time U.S. and Japanese monetary authorities stepped in to buy the yen, a Japanese media outlet has analyzed that concerns over the still-large U.S. trade deficit with South Korea lie in the background.

U.S. and Japanese authorities have intermittently intervened by buying yen and selling dollars since July 30, inducing an increase in the yen's value.

Market watchers suggest the possibility that South Korean foreign exchange authorities also stepped in to defend the exchange rate around a similar time by purchasing the won and selling dollars.

However, South Korean foreign exchange authorities have not officially confirmed whether market intervention took place.

In a report published today (August 6), the Nikkei Shimbun analyzed that if intervention to buy the won actually occurred, its background lies in the U.S. trade deficit with South Korea, which has roughly doubled over the past decade.

Last year, the U.S. trade deficit with South Korea reached $56.477 billion (approx. 80 trillion won).

The report explained that as investments in artificial intelligence (AI) expand, South Korea's exports of memory semiconductors to the U.S. are projected to increase further, which could heighten the burden on the United States.

Takahiro Hori, an economic analyst at Mizuho Bank, analyzed that concerns from the U.S. over a widened trade deficit driven by a weak won appear to be behind the intervention to buy the won.

In the Japanese financial market, interpretations also emerged that South Korea, whose foreign exchange reserves are about one-third the size of Japan's, may have sought to maximize market impact by coordinating with Japan's foreign exchange intervention.

Nikkei also reported that as SK hynix converted a portion of the $26.5 billion (approx. 40 trillion won) secured through its American Depositary Receipt (ADR) listing into the won, downward pressure on the won-dollar exchange rate grew, prompting other South Korean export companies to follow suit by selling dollar deposits.

Guo Ying, a foreign exchange and Asian economic strategy analyst at Nomura Securities, projected that South Korea's improving economic fundamentals, combined with the trend of joint U.S.-Japan coordinated intervention, could lead to further gains in the value of the won.
 
(Photo: Yonhap News TV, Yonhap News)