The foreign exchange authorities sold over $9.6 billion in net transactions during the second quarter of this year. To stabilize the foreign exchange market, they supplied $23.2 billion in the first half alone. The increase in the won-dollar exchange rate in both the first and second quarters is interpreted as a reason for the dollar supply.
According to the "Market Stabilization Measures for Q2 2026" released by the Bank of Korea on September 30, the net foreign exchange transaction amount by the authorities was -$9.612 billion. This represents a decrease of $4.016 billion (29.5%) compared to the net selling amount of -$13.628 billion in the first quarter. The total net selling amount for the first half of the year reached $23.24 billion.
The net foreign exchange transaction amount is calculated by subtracting the total amount of dollars sold from the total amount of dollars purchased by the foreign exchange authorities. A negative net transaction amount indicates that the volume of dollars sold in the market exceeded the volume purchased. The authorities supply dollars to mitigate volatility and market concentration when the exchange rate surges.
In the first half of this year, the foreign exchange market experienced a continued depreciation of the won. Following the outbreak of war in the Middle East, the won-dollar exchange rate averaged 1,466.9 won in the first quarter, up from 1,448 won in the previous quarter. In the second quarter, it further increased to an average of 1,501.9 won. Notably, in June, the exchange rate remained above 1,500 won for the entire month for the first time since February 1998 during the foreign exchange crisis. The sustained high exchange rate in the first half is interpreted as a reason for the authorities' ongoing market stabilization efforts.
When the foreign exchange authorities engage in net selling of dollars, it increases the supply of dollars in the market, thereby reducing upward pressure on the exchange rate. However, the exchange rate is also influenced by global dollar flows, the movement of domestic and foreign investment funds, and the foreign exchange supply and demand of export and import companies, meaning that the authorities' actions alone do not determine market movements.
The scale of net selling has decreased for two consecutive quarters since peaking in the fourth quarter of last year. The net selling amount, which was $22.467 billion in the fourth quarter of last year, shrank to $13.628 billion in the first quarter and $9.612 billion in the second quarter of this year. The total net selling amount from the fourth quarter of last year to the second quarter of this year reached $45.77 billion.
In the third quarter, the trend of the exchange rate has changed significantly. The average won-dollar exchange rate in the third quarter was 1,419.6 won, down 82.3 won (5.5%) from the second quarter's average of 1,501.9 won. After remaining above 1,500 won until June, the exchange rate began to decline after July, closing at 1,352.8 won on this day. As the pressure for won depreciation eases, the need for the foreign exchange authorities to sell dollars is likely to have decreased compared to the first half.
This disclosed data reflects the net result of dollar purchases and sales during the quarter, so specific intervention timings or transaction sizes cannot be confirmed. The Bank of Korea and the Ministry of Economy and Finance have been releasing the difference between total dollar purchases and sales by the foreign exchange authorities quarterly since the third quarter of 2019. The details of market stabilization measures for the third quarter of this year are scheduled to be released on December 31.
* This article has been translated by AI.
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