South Korea’s foreign exchange authorities net-sold approximately $9.6 billion in the foreign exchange market during the second quarter to curb a sharp rise in the won-dollar exchange rate. With the average rate holding in the 1,500-won range, this marked the fifth-largest quarterly intervention on record.
According to market stabilization measures disclosed by the Bank of Korea on the 30th, foreign exchange authorities net-sold $9.612 billion in Q2 (April–June) to stabilize the foreign exchange market. Applying the Q2 average won-dollar exchange rate of 1,502 won, this amounts to approximately 14.4 trillion won.
This represents a decline of roughly $4 billion (29.5%) from Q1’s $13.628 billion. However, it extended the net-selling streak to seven consecutive quarters since Q4 2024.
By quarterly net-selling volume, it ranked fifth-largest, following Q4 2025 at $22.467 billion, Q3 2022 at $17.543 billion, Q2 2022 at $15.409 billion, and Q1 of this year at $13.628 billion.
The Q2 average won-dollar exchange rate was the highest since the Asian financial crisis. The dollar’s strength amid the Middle East conflict, combined with profit-taking sell-offs by foreign investors as the KOSPI rallied, drove the exchange rate sharply higher, prompting authorities to respond by selling dollar holdings.
Corporate Dollar Sales Ease Intervention Burden
The reduction in authorities’ net-selling volume from Q1 was partly attributable to expanded dollar supply from corporations. According to data the Bank of Korea submitted to the National Assembly, non-financial private corporations’ net sales of dollar spot and forward contracts reached $109.65 billion in Q2, nearly quadruple the $29.47 billion recorded in the same period last year.
Corporate dollar sales totaled $263.59 billion, while purchases amounted to $153.94 billion. Sales volume was up 71.5% from Q2 last year ($153.67 billion). With corporations offloading dollars into the market, the direct intervention burden on authorities was partially alleviated.
Foreign exchange market intervention is conducted using the foreign exchange reserves held and managed by the Bank of Korea. When the won-dollar exchange rate spikes over a short period, authorities sell dollars in the market to increase supply; conversely, when the rate plunges, they sell won and buy dollars.
Q3 Intervention Expected to Narrow
In Q3, foreign exchange market supply-demand conditions improved significantly, and with the exchange rate declining, authorities’ dollar net-selling is expected to have contracted. The Q3 average exchange rate was 1,418.62 won, the lowest level in a year since Q3 last year (1,386.13 won).
Monthly average rates trended downward: 1,488.92 won in July, 1,404.35 won in August, and 1,358.75 won in September. With the rate stabilizing in the 1,300-won range, the need for market intervention by authorities has diminished, analysts say.
As of the end of last month, foreign exchange reserves stood at $442.28 billion, up $14.33 billion from the previous month. A sharp increase in banks’ foreign currency deposits driven by semiconductor export proceeds pushed the monthly gain to a record high. The previous record increase was $14.29 billion at the end of May 2009. Foreign exchange reserves have now risen for three consecutive months since June.
The Bank of Korea and the Ministry of Economy and Finance have been disclosing quarterly foreign exchange market stabilization transaction volumes since Q3 2019. This latest disclosure marks the first time intervention activity from Q2—a period of heightened exchange rate volatility—has been revealed.
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