South Korea is discussing foreign exchange issues with US financial authorities. Their goal is to get off the US Treasury’s currency manipulation list. The South Korean won will be managed according to market principles, with no fixed exchange rate set by officials. South Korea was first listed as a currency manipulator in 2016.

Currency Concerns

The country was taken off the list in November 2023 but was added back in November 2024 due to worries about trade and current account surpluses. South Korea wants to address these currency issues with the US as part of a trade agreement. As talks with US authorities continue, we should expect increased volatility in the South Korean won in the coming weeks. These discussions create uncertainty, which can present opportunities for derivative traders focusing on currency changes. This makes USD/KRW futures and options particularly appealing right now. Officials indicate that they will allow market forces to guide the won without aiming for a specific exchange rate. However, the desire to be removed from the US Treasury’s list suggests they need to tackle the trade surpluses that caused their re-listing. This means they may not actively strengthen the won, but they probably won’t allow it to weaken significantly.

Trade Surplus Insights

Recent data shows South Korea’s trade surplus for July 2025 was $4.5 billion. While still strong, this figure is down from earlier peaks this year, likely due to a slight appreciation of the won as the USD/KRW rate approached the 1,350 level. Both US and Korean officials will closely monitor these figures during their discussions. We can look back to before November 2023, when South Korea was last off the list, for a similar situation. During that time, the central bank was often active in the market, trying to prevent excessive currency weakness. It’s reasonable to think that they may employ subtle interventions again to avoid sharp increases in the USD/KRW pair. For derivative traders, this suggests that strategies capitalizing on volatility, like buying options, could be effective. Political pressure creates a gentle downward pull on the USD/KRW exchange rate, but sharp price swings are more likely than a steady trend. Any updates from the trade negotiations could significantly influence the market. Create your live VT Markets account and start trading now.

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