According to people familiar with the matter, the won has weakened enough to force South Korea's National Pension Service (National Pension Service) to sell foreign exchange worth nearly 50 billion dollars to hedge against losses.

“If the average closing exchange rate exceeds 1,450 won for 5 consecutive trading days, the National Pension Plan will implement strategic hedging.” They said that once launched, strategic currency hedging will continue unless the exchange rate falls sharply.

According to foreign media reports, the Federal Reserve's signal to cut interest rates in 2025 weighed on market sentiment. USD/KRW rose 1.1% to 1451.90 in onshore trading in Seoul, with foreign and institutional investors being net sellers. The South Korean stock market also couldn't escape the fate of falling. Electronics and internet stocks led the decline on the same day. Memory chip makers Samsung Electronics and SK Hynix fell by 3.3% and 4.6% respectively, following the overnight decline of its American counterpart Micron Technology. Mobile internet platform company Kakao Corp. fell 5.1%.

Sources said that if the Korean won exchange rate deviates sharply from the long-term average of more than 20 years, the pension fund is obligated to hedge its foreign exchange assets by up to 10%. Due to the sensitive nature of the matter, these individuals asked not to be named. A formula revealed by people familiar with the matter shows that as of Wednesday, the exchange rate of the won against the US dollar fell to its lowest level since 2009, and the level of 1 US dollar to 1,450 won has broken through the national pension's own internal trigger mechanism.

According to the Korea National Pension Fund website, as of the end of September, the total foreign currency assets of the pension fund were 485.5 billion US dollars.

A source said that after recently buying 2 billion to 3 billion US dollars of foreign exchange every month, the South Korean National Pension Fund may sell more foreign exchange next year than it buys. The fund is the largest player in Korea's domestic foreign exchange market, and the downward pressure on the won is expected to subside if it stops buying.

Due to political uncertainty about the impeachment of the president and the appreciation of the US dollar, the won was the weakest currency in Asia this year, and the won fell by more than 11% this year.

The governor of the Bank of Korea said earlier that although the exchange rate of the US dollar is rising against the Korean won, he is not worried about market conditions. There are no signs of a similar crisis in the foreign exchange market. There will be no special session to cut interest rates this month; more data will be reviewed. When volatility increased due to the martial law incident, calm operations were carried out in the foreign exchange market. If it is discovered that the exchange rate fluctuates too much, it will once again interfere with the foreign exchange market. After the political process stabilizes, there is still room for the dollar to fall against the Korean won.

Furthermore, South Korea's finance minister stated that it will respond positively to excessive fluctuations in the foreign exchange market and will use all available resources to manage the economy as stably as possible.