South Korea Added to US Treasury’s Currency Watch List
Analysts in Seoul noted on Friday that South Korea’s inclusion on the U.S. Treasury’s currency watch list is unlikely to significantly impact the country’s foreign exchange market. They view the semi-annual report as almost routine and without immediate policy consequences.
“This report drew considerable attention in the early days of President Trump’s term last year. However, it didn’t lead to any concrete actions, and now it’s more of an old issue,” said Lee Jeong-hoon from Daeshin Securities. “I don’t expect it to heavily influence the market.”
Kwon Amin from NH Investment & Securities echoed this sentiment, mentioning that the Treasury’s currency reports have become more formulaic in recent years, often lacking the political weight they once had.
“We anticipate minimal market impact from the report,” Kwon remarked.
On Thursday, the U.S. Treasury Department added South Korea to its currency watch list, which also includes countries like China, Japan, and Germany, as part of a report to Congress on macroeconomic policies for major trading partners. This list remained unchanged from the previous report released in January.
The Treasury assesses economies using three criteria: a goods and services trade surplus with the U.S. of at least $15 billion, a current account surplus exceeding 3% of GDP, and sustained net foreign currency purchases over 2% of GDP for at least eight months in a year.
Countries meeting two of those criteria appear on the watch list, while those that fulfill all three face enhanced scrutiny. South Korea stayed on the list despite qualifying for both the trade and current account surplus.
The Ministry of Finance reported that South Korea’s current account surplus grew to 6.6% of GDP in 2025, up from 5.3% the previous year, largely driven by increased semiconductor and tech exports. Nonetheless, the won has faced downward pressure due to rising capital outflows from overseas investments countering some foreign exchange inflows from exports.
The Ministry highlighted that public institutions like the National Pension Service, alongside households and non-bank financial firms, have significantly increased their overseas stock purchases, contributing to this strain on the won.
During a meeting with South Korean Finance Minister Koo Yun-cheol on January 14, Treasury Secretary Scott Bessent expressed concern about the weak won. He commented that the depreciation pressures were at odds with South Korea’s robust economic fundamentals and characterized excessive volatility in the foreign exchange market as undesirable.
“The Korean authorities’ interventions in the currency market during this reporting period seemed aimed at mitigating excessive fluctuations amid depreciation pressures,” the Ministry stated.
Regarding structural reforms, the ministry positively acknowledged the South Korean government’s efforts to ease restrictions on foreign investors’ access to the domestic foreign exchange market, suggesting that this will enhance liquidity and price discovery in the medium to long term.
The Treasury Department, under the Trade Facilitation and Trade Enforcement Act of 2015, monitors the macroeconomic and monetary policies of the U.S.’s 20 largest trading partners.
South Korea was taken off the Currency Watch List in November 2023 for the first time in over seven years, only to be added back in November 2024 just before President Trump took office.
Following this latest report, the Ministry of Finance and Economy announced plans to maintain close communication with the U.S. Treasury Department, stating, “We aim to foster mutual understanding and trust regarding the foreign exchange market and continue collaborating toward its stabilization.”
