Won Breaches 1,450: South Korean Won Exchange Rate Defense Intensifies as Banks Cut Dollar Rates

The psychological floor of 1,450 won has shattered. According to Yonhap, South Korea's major commercial banks and foreign exchange authorities are launching an all-out effort to stabilize the local currency. By slashing interest rates on dollar deposits and offering incentives for selling greenbacks, officials aim to curb a speculative frenzy that's pushing the won to its lowest levels in months.

The War on Volatility: South Korean Won Exchange Rate Pressure

The won was quoted at 1,473.6 per dollar on Friday, resuming its downward slide after a brief rebound. In response, the Financial Supervisory Service (FSS) scheduled an emergency meeting for Monday to demand that lenders pull back on aggressive marketing for foreign currency deposits.

Leading the charge, Woori Bank has aggressively cut its dollar interest rates from 1% to a mere 0.1% for its travel-focused products. Meanwhile, KB Kookmin Bank is rolling out red carpets for exporters who convert their foreign holdings back into won. These moves signal a coordinated push to drain dollar liquidity from the retail and corporate sectors.

Clamping Down on Speculative Insurance

Regulators aren't just looking at banks. FSS Governor Lee Chan-jin has turned his sights on the insurance sector. Sales of dollar-denominated insurance products have surged, which authorities argue fuels speculative demand and further weakens the won. Insurers are now under pressure to review their internal controls or face potential inspections.

The Bank of Korea (BOK) is also using its balance sheet to support the currency. It recently announced a temporary plan to pay interest on foreign currency required reserves—a technical move designed to boost domestic dollar liquidity. These collective actions highlight the severity of the current FX crisis and the government's resolve to prevent a deeper slide.