South Korea plans to issue its first won-denominated foreign-exchange (FX) stabilization debt in more than two decades, aiming to bolster its currency market and reduce funding costs, Bloomberg reports, citing a finance ministry official.
The government intends to sell up to 20 trillion won ($13.8 billion) in these bonds throughout 2025, with monthly issuances starting on January 24.
The size of each monthly offering has yet to be determined, but the official, who requested anonymity due to the private nature of the matter, indicated that the program is designed to strengthen the nation’s foreign-exchange equalization fund and help manage currency market volatility, especially when the won is perceived as excessively strong. Yonhap Infomax had earlier reported estimates of monthly issuances ranging from 1 trillion won to 2 trillion won.
The move marks a significant step in South Korea’s efforts to manage its currency. The bonds are designed to offer a tool for the government to intervene in the currency market and help reduce won funding costs by providing an alternative source of capital. These won-denominated bonds will be used to back the nation’s foreign exchange equalization fund.
The official clarified that the issuance had initially been planned for earlier this year but was delayed due to legislative revisions. He emphasized that the timing is unrelated to the recent weakening of the won, which hit its lowest level since 2009 earlier this month. This decline has been attributed to a hawkish stance from the U.S. Federal Reserve, which strengthened the dollar, and to domestic political factors that have put pressure on South Korean assets.
The planned monthly bond sales represent a strategic shift in South Korea’s approach to currency management. By issuing debt in its own currency, South Korea aims to gain greater control over its financial market and ensure greater stability in its foreign-exchange reserves.
