[Yeoui Spring and Autumn] The Currency War Launched by the Authorities: May Fortune Be with Them

As is known, the subsequent developments were dramatic. The rate fell by approximately 34 won in a single day (won appreciation). It then dropped precipitously — to 1,440.3 won on the 26th and 1,429.8 won on the 29th — falling more than 50 won over three days, before rebounding to 1,439.0 won on the 30th, the final trading day of the year. The concern expressed barely a week earlier about the rate breaching 1,500 won seemed almost embarrassing. Retail investors interpreted the authorities' verbal intervention as a "boot-heel intervention." Since a mere statement could not reverse the exchange-rate trend so sharply, it was surmised that a large volume of selling — such as currency hedging by the National Pension — must have poured into the market. Perhaps feeling some remorse for the ruthless actual intervention concealed within verbal packaging, the authorities also offered a compensatory measure alongside it.

(Excerpt)

The real contest, however, begins this year. The Ministry of Economy and Finance and the Bank of Korea — the institutions that intervened in the market — are surely more aware than anyone else that the peculiar(?) won appreciation of the past week was not attributable to the resilience of the Korean economy. The won–dollar exchange rate had been trending upward (i.e., won depreciation) throughout the second half of last year. The annual average of 1,422.16 won marked an all-time high, exceeding even the level recorded during the foreign-exchange crisis of 1998 (1,398.39 won). If Korea during the foreign-exchange crisis was an acute pneumonia patient, it is now the equivalent of a chronically ill patient. Artificially blocking the trend of dollar outflows is bound to produce a market reaction.

https://n.news.naver.com/article/005/0001823688?sid=110