U.S. keeps South Korea on currency monitoring list

Published: Friday, July 24, 2026 at 10:00 pm

The U.S. Treasury Department has once again placed South Korea on its currency monitoring list, marking the fourth consecutive report where the nation's currency practices have come under scrutiny. This decision stems from the Treasury's assessment that the sustained weakness of the South Korean won is inconsistent with the country's robust economic fundamentals.

In its semiannual report, the Treasury Department reviewed the macroeconomic and foreign exchange policies of major U.S. trading partners. South Korea was included on the monitoring list alongside China, Japan, Taiwan, Thailand, Singapore, Vietnam, Germany, Ireland, and Switzerland. All ten economies had also appeared on the previous report issued in January.

The Treasury Department found that no major U.S. trading partner engaged in currency manipulation to gain an unfair trade advantage or prevent balance-of-payments adjustments during the four quarters ending in December 2025. Furthermore, no economy met all three statutory conditions that would trigger enhanced analysis.

South Korea, however, met two of these conditions: it recorded a substantial trade surplus with the United States and a current account surplus exceeding the required threshold. The country did not meet the third condition, which involves persistent, one-sided purchases of foreign currency. Under the Trade Facilitation and Trade Enforcement Act of 2015, enhanced analysis is generally triggered when an economy has a bilateral goods and services surplus with the U.S. of at least $15 billion, a current account surplus of at least 3% of GDP, and net foreign currency purchases equivalent to at least 2% of GDP over a significant portion of the year.

In contrast to the conditions for enhanced analysis, South Korean authorities sold a net $28 billion in foreign currency during 2025, approximately 1.5% of GDP, with the stated aim of moderating volatility and depreciation pressures on the won. A significant portion of these sales, about $22.5 billion, occurred in the fourth quarter.

The Treasury Department noted that South Korea's current account surplus widened to 6.6% of GDP in 2025 from 5.3% in 2024, primarily driven by its goods trade surplus, particularly in semiconductors and other technology exports. This surplus also surpassed the country's average of 5% of GDP in the five years preceding the COVID-19 pandemic. While the bilateral goods and services surplus with the U.S. decreased to $45 billion in 2025 from $54 billion a year prior, largely due to a drop in U.S. automobile imports from South Korea, it remained roughly double the level seen a decade ago.

Despite these large external surpluses, the won experienced sustained depreciation pressure. Treasury Secretary Scott Bessent had previously stated that the won's depreciation was not aligned with South Korea's strong economic fundamentals and that excessive foreign exchange market volatility was undesirable. The won weakened significantly towards the end of 2025 before recovering in the final trading sessions of the year, strengthening by 2.6% amid reported intervention by South Korean authorities.

Overseas investments by South Korean institutions and households were identified as contributing to downward pressure on the won. Foreign equity accumulation by government-related institutions surged to $41 billion in 2025 from $8 billion in 2024, with unhedged investments increasing demand for foreign currencies. The Treasury Department emphasized that government investment vehicles should not be used to influence exchange rates for competitive purposes.

South Korea and the United States issued a joint statement in September 2025, reaffirming that foreign exchange intervention should be limited to addressing excessive volatility and not used to gain a trade advantage. The Treasury Department welcomed South Korea's efforts to enhance foreign institutional participation in its domestic foreign exchange market, anticipating improvements in market liquidity and price discovery. South Korea has extended trading hours and eased restrictions on foreign institutions to improve access to the won market.

South Korea was previously removed from the monitoring list in November 2023 but returned in November 2024. Its continued presence on the list does not constitute a designation as a currency manipulator but signifies closer U.S. scrutiny of its currency practices and economic policies.

BNN's Perspective:
The U.S. Treasury's decision to keep South Korea on its currency monitoring list highlights the ongoing tension between a nation's economic fundamentals and its currency's performance in the global market. While South Korea's economic strength is acknowledged, the sustained weakness of the won, coupled with significant trade and current account surpluses, warrants continued attention. The Treasury's emphasis on the proper use of foreign exchange intervention and the role of overseas investments provides a balanced perspective, aiming for market stability without stifling legitimate investment activities. The ongoing dialogue and reforms initiated by South Korea suggest a commitment to addressing these concerns, which is a positive step towards fostering mutual understanding and confidence in foreign exchange policy.

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