US Treasury Chief Flags Excessive Won Volatility, Raising Hopes for Currency Stability

After US-Japan Foreign-Exchange Intervention

Won Strengthens Alongside Yen

Weak Won Raises Burden of Korean Investment in US

US Administration Also Wants Won Stability

US Treasury Secretary Scott Bessent said the South Korean won has shown "excessive volatility" as he explained the expected effects of foreign-exchange market intervention.

In an interview with CNBC on August 4, Bessent said that if the yen remains substantially weak, other currencies will follow. "We have seen excessive volatility in the Korean won, and many people believe the Chinese yuan is undervalued," he said. He added that the US and Japan have been coordinating closely to stabilize the yen and that Washington would do "whatever it takes" to support Japan.

The won has recently moved in tandem with the yen, extending its weakness against the dollar while swinging more sharply than the Japanese currency. In May, the yen depreciated 2% against the dollar, while the won fell 4.6%. In June, the yen appreciated 3.8% against the dollar, but the won weakened 7.1%, rising into the mid-1,500 won-per-dollar range.

Bessent's comments on won volatility suggest the currency also needs to move away from excessive weakness and regain a more stable footing. When the US and Japan intervened in the foreign-exchange market, the won also strengthened, prompting talk in the market that South Korean authorities may have stepped in as well. A weak won also makes it harder for South Korean companies to invest in the US, one reason the Trump administration wants the currency to recover alongside the yen.

Bessent said Japan is expected to implement policies that return the yen to a "normal equilibrium price." He said market intervention alone cannot reverse an exchange-rate trend and that monetary policy, fiscal policy and economic fundamentals will ultimately determine the yen's value. Asked whether the Bank of Japan needs to raise interest rates further, he said Governor Kazuo Ueda had indicated he would take necessary steps.

Hwang Jung-soo, New York correspondent, Hankyung.com, hjs@hankyung.com