South Korea Acts to Steady Won; Taiwan Loosens FX.

South Korea Acts to Steady Won; Taiwan Loosens FX.

This week saw two targeted currency interventions in East Asia. South Korea unveiled a coordinated set of measures to increase U.S. dollar availability and blunt a sharp fall in the won, while Taiwan relaxed limits on exporters’ dollar sales to relieve pressure on the Taiwan dollar (TWD). Both actions are pragmatic, operational responses focused on FX liquidity rather than broad monetary-policy reversals.

Major move: South Korea’s FX package to stabilise the won

What was announced

The Bank of Korea and government agencies rolled out a multi-pronged effort to bolster dollar supply in the onshore market after the won shed sizeable value in recent months. Key elements include:

• Interest payments on excess reserve deposits for financial institutions to encourage holding local currency liquidity.
• Temporary exemptions or relief on certain deposit requirements tied to foreign-currency liabilities.
• An extended currency swap arrangement with the National Pension Service to provide additional dollar funding.
• Easing of caps on forward FX trading for banks to allow more hedging activity.
• Direct dollar sales in the FX market to meet near-term demand.
• Heightened regulatory scrutiny of overseas investment flows and engagement with exporters to reduce opportunistic behaviour.

Why it matters

The measures aim to rebalance supply and demand for dollars in South Korea’s onshore market rather than to permanently alter monetary policy. With the won having weakened markedly this year, the package is designed to:

• Ease acute FX liquidity squeezes and reduce volatility.
• Lower imported-inflation pressure that can arise from a sharply weaker currency.
• Signal authorities’ readiness to act, which can discourage speculative one-way bets on further depreciation.

Because the approach combines operational tools (dollar sales, easing trading caps) with regulatory adjustments, it focuses on quick, measurable relief. The move is especially relevant to traders, corporate treasurers, and investors with exposure to South Korea’s external funding and export sectors.

Minor move: Taiwan relaxes exporter dollar-sales cap

What changed

Taiwan’s central bank eased a restriction that had limited exporters to selling dollar proceeds in up to 10 tranches of $1 million each per day. Removing that cap allows exporters greater flexibility to remit or hedge receipts and should increase dollar inflows into the onshore FX market.

Implications for the Taiwan dollar

The adjustment is a targeted, tactical step intended to relieve short-term depreciation pressure on the TWD after foreign portfolio outflows weighed on local equities and currency. By allowing exporters to convert and repatriate larger dollar amounts more efficiently, authorities expect a near-term boost in dollar supply. The change is not a broad monetary loosening; it is a liquidity-focused tweak aimed at smoothing FX flows.

Practical takeaways for FX participants

• Both actions are operational liquidity measures: they aim to address supply-demand imbalances rather than signal major policy-rate changes.
• For carry and hedging strategies, expect reduced near-term volatility in KRW and temporary support for TWD as dollar availability improves.
• Corporate treasurers with exposure to either currency should review hedging timings and settlement windows—South Korea’s easing of forward caps and Taiwan’s lifted exporter limits change practical execution options.

Conclusion

South Korea’s coordinated package and Taiwan’s easing of exporter rules are immediate, practical responses to currency stress. They prioritise FX liquidity—via direct dollar supply, regulatory adjustments and operational flexibility—over headline monetary-policy shifts. For market participants, the moves reduce acute FX pressure and offer clearer execution and hedging pathways in the near term, though broader currency trajectories will continue to reflect capital flows and global risk sentiment.