Treasury puts South Korea on currency list fourth straight time

Won weakness persists despite elevated current account surplus

The U.S. Treasury Department kept South Korea on its currency monitoring list for the fourth consecutive semiannual report, saying the won’s sustained weakness was inconsistent with the country’s strong economic fundamentals even as technology exports drove a widening current account surplus.

The monitoring list, released in the department’s semiannual report on macroeconomic and foreign exchange policies of major U.S. trading partners, includes 10 economies: South Korea, China, Japan, Taiwan, Thailand, Singapore, Vietnam, Germany, Ireland and Switzerland. All 10 appeared in the previous report released in January, the department said.

The Treasury Department found that no major U.S. trading partner manipulated its currency to prevent effective balance-of-payments adjustments or gain an unfair trade advantage during the four quarters through December 2025. No economy met all three statutory conditions requiring enhanced analysis.

South Korea met two of the three conditions. The country recorded a current account surplus of 6.6% of GDP in 2025, up from 5.3% in 2024, driven almost entirely by the goods trade surplus, particularly exports of semiconductors and other technology products. South Korea’s goods and services surplus with the United States declined to $45 billion in 2025 from $54 billion a year earlier, largely because U.S. automobile imports from South Korea fell, the department said.

The country did not meet the third condition involving persistent, one-sided purchases of foreign currency. Under the Trade Facilitation and Trade Enforcement Act of 2015, enhanced analysis is generally required when an economy records a bilateral goods and services surplus with the United States of at least $15 billion, a current account surplus equal to at least 3% of GDP and net foreign currency purchases equal to at least 2% of GDP over at least eight of 12 months.

South Korean authorities instead sold a net $28 billion in foreign currency during 2025, equivalent to about 1.5% of GDP, as they sought to moderate volatility and depreciation pressure on the won. About $22.5 billion of those sales took place during the fourth quarter.

The won weakened sharply toward the end of 2025, and on Jan. 14, Treasury Secretary Scott Bessent said the won’s recent depreciation was not consistent with South Korea’s strong economic fundamentals and that excessive foreign exchange market volatility was undesirable. The currency strengthened 2.6% from 1,481 won per dollar on Dec. 23 to 1,445 won on Dec. 31 amid reported intervention by South Korean authorities.

MSI previously reported that the South Korean won slid to a 17-year low in early June, breaching 1,560 won per dollar as foreign selling of domestic stocks accelerated.

The Treasury Department said overseas investment by South Korean institutions and households contributed to downward pressure on the currency. Foreign equity accumulation by South Korean government-related institutions reached $41 billion in 2025, up sharply from $8 billion in 2024. Those flows included overseas investments by the National Pension Service and were largely unhedged, increasing demand for foreign currencies, the department said.

The Treasury Department examined the pension fund’s foreign exchange framework and currency hedging policies, emphasizing that government investment vehicles should not be used to influence exchange rates for competitive purposes.

South Korea and the United States issued a joint statement on foreign exchange policy in September 2025, reaffirming that foreign exchange intervention should be limited to addressing excessive volatility or disorderly market movements and should not be used to gain a trade advantage.

The Treasury Department welcomed South Korea’s efforts to allow greater participation by foreign institutions in its domestic foreign exchange market, saying the changes should help improve market liquidity and price discovery over the medium and long term. South Korea has extended foreign exchange trading hours and relaxed restrictions on registered foreign institutions as part of efforts to improve access to the won market.

South Korea was removed from the monitoring list in November 2023 but returned in November 2024. It has remained on the list through the June 2025, January 2026 and July 2026 reports.

Placement on the monitoring list does not mean the United States has designated South Korea as a currency manipulator. The designation means the country’s currency practices and broader economic policies will remain subject to closer U.S. scrutiny.