[News Space=Reporter seungwon lee] The Korean won fell 3.3% against the US dollar in the fourth quarter of 2025, ranking fifth among 42 currencies worldwide.

According to Bank of Korea data on the 26th, the Korean won was trading at 1,446.76 won as of December 25th. On December 24th, the won surged 33.8 won in a single day, its largest increase in three years, following strong verbal intervention from financial authorities. This marks the first time the won has recovered above 1,480 won since the 2009 global financial crisis, following two consecutive days of hovering around 1,480 won on December 22nd and 23rd.

Global currency rankings and the position of the Korean Won

Among the 42 currencies tracked by the Bank of Korea, the won's weakening in the fourth quarter was the fifth-largest, following the Argentine peso (-6.8%), Japanese yen (-5.1%), Brazilian real (-3.7%), and Taiwanese dollar (-3.3%). This weakness reflects the won's continued decline despite the global dollar's continued weakness. The US dollar index is hovering between 97 and 98, with a reading below 100 indicating a weak dollar.

Structural weakening factors

The weak won is seen as a reflection of structural economic vulnerabilities, beyond simple supply and demand in the foreign exchange market. The National Pension Service purchased an additional 70 trillion won in overseas assets this year, bringing its total overseas investment to 771 trillion won (58% of total assets). Fueled by the artificial intelligence boom, individual investors recorded a record-breaking net purchase of $32 billion in US stocks.

Foreign investors sold off 14.4 trillion won worth of Korean stocks in November, but turned net buyers in early December, purchasing 1.9 trillion won. This outflow led to the disappearance of $100 bills at a Hana Bank branch in Gangnam District, Seoul. The real effective exchange rate (REER) of the Korean won hit 87.05 in November, its lowest level since 2009. A value below 100 indicates a structural problem: the Korean won is undervalued, making exports cheaper but imports more expensive.

Strong government response

On December 24, the Ministry of Strategy and Finance and the Bank of Korea jointly announced a verbal intervention, stating that "excessive won depreciation is undesirable" and that the government's "strong will and comprehensive policy implementation capabilities will soon be confirmed." The National Pension Service (NPS) launched a strategic foreign exchange hedging program worth up to $50 billion to support the won. The government also introduced a tax benefit that exempts individual investors from capital gains taxes up to 50 million won (approximately $34,400) when they sell foreign stocks and buy domestic stocks.

Baek Seok-hyun, an economist at Shinhan Bank, analyzed, "Unless the domestic stock market's investment attractiveness improves, the won's weakness could persist in the long term." Global investors are also seeing the won weaken against currencies considered safe havens, with the won depreciating by more than 6-8% against major currencies like the Chinese yuan, euro, and Swiss franc.

The won's weakness is believed to be the result of a combination of short-term supply and demand factors, structural economic vulnerabilities, and foreign capital outflows. Despite strong government intervention, there is an urgent need for long-term economic structural improvements and to enhance the investment attractiveness of the domestic stock market.