U.S.-Japan intervention threat lifts won to this year’s high

A customer at a foreign exchange counter converts currencies in Myeongdong in central Seoul on Jan. 26. [NEWS1]

 
The won strengthened to its strongest level this year on Monday, driven by signs of a potential U.S.-Japan joint intervention on the weak Japanese yen, which often moves in tandem with the won.
 
The local currency traded at 1,437.9 against the greenback during regular trading hours, advancing 28 won from the previous trading session. The won strengthened as the yen extended gains following remarks by Japan’s Chief Cabinet Secretary Minoru Kihara on Monday that Tokyo and Washington will closely coordinate on foreign exchange. 
 
 
The remarks echoed those of Atsushi Mimura, Japan’s top foreign exchange official, who reaffirmed U.S.-Japan coordination under the September 2025 joint statement on market-determined exchange rates. Prime Minister Sanae Takaichi also warned on Sunday that the government would take action against speculative or highly abnormal moves after the yen’s Friday gains fueled speculation of a rate check — often seen as a signal of market intervention — by the New York Federal Reserve. According to several media outlets, including Reuters, U.S. authorities conducted rate checks of market participants.
 
“With the United States pursuing tariff policies, the U.S.-Japan coordination can be seen as supporting the strengthening of both the yen and the won, as weaker counterpart currencies would reduce the effectiveness of those tariffs,” said Park Sang-hyun, a foreign exchange analyst at iM Securities.
 
“Unlike in the past, when the won was closely correlated with the Chinese yuan, its linkage with the yen has strengthened as Korea and Japan have increased trade dependence on and investment in the United States,” he continued.
 

The yen has been steadily strengthening against the dollar since Takaichi became prime minister last October, as expectations that she will continue former Prime Minister Shinzo Abe’s expansionary fiscal policies grew.
 
Won has also stayed weak on growing overseas investment. Despite the government’s active measures to tame the won, such as making multiple verbal interventions and discouraging the purchase of foreign stocks, the currency has stayed weak against the dollar in the 1,400 won range since September 2025.
 
As the rate stays weak, President Lee Jae Myung said last week that the authorities expect the won to strengthen to around the 1,400-per-dollar level in a month or two. U.S. Treasury Secretary Scott Bessent also gave verbal support earlier this month, saying a weak won is “not in line with Korea’s strong economic fundamentals.”
 
“A key factor from the co-movement of the two currencies was signals from the U.S. Treasury suggesting it may tolerate currency intervention by allied nations,” said Chung Hae-chang, a strategist at Daishin Securities, in a Monday report, noting the recent unprecedented comments by the U.S. Treasury secretary reinforce expectations of possible coordinated intervention between Korea and the United States.
 
“With Kospi earnings expectations entering an upward revision phase, further stability in the won-dollar exchange rate is likely to support stronger foreign inflows,” Chung said, adding that sectors such as energy, consumer staples, retail and hotels would benefit from improved foreign investor demand and lower import costs stemming from a stronger won.
 

Electronic display boards at a dealing room in Woori Bank in central Seoul show Korea’s financial markets on Jan. 26. [NEWS1]

 
Another key factor that could further determine won and yen’s movement is the U.S. interest rate.
 
“For now, both Korea and Japan are likely to keep interest rates on hold,” Park from iM Securities said. “If the United States were to cut rates, it would create downward pressure on the dollar. In that scenario, the won and the yen would likely move toward stronger footing.”
 
The Federal Reserve cut rates at its last three meetings, bringing the rate to a range of 3.5 to 3.75 percent — still higher than the Bank of Korea’s 2.5 percent. Its next rate cut is expected in June, according to a Bloomberg survey released ahead of the Federal Open Market Committee meeting set to begin on Wednesday.

BY JIN MIN-JI [[email protected]]