U.S. keeps S. Korea on FX policy 'monitoring list'

Lead

The United States has kept South Korea on its list of major trading partners monitored for foreign exchange policies, according to the U.S. Treasury Department's latest semiannual report. The decision, detailed in the "Report to Congress on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States," was released on Thursday, with Yonhap reporting the development.

Coverage Comparison

Yonhap News Agency, reporting from Washington and Seoul, provided consistent accounts of the Treasury's action. One report, filed from Washington on Thursday, noted that the list now includes ten economies: South Korea, China, Japan, Taiwan, Thailand, Singapore, Vietnam, Germany, Ireland, and Switzerland. That same report highlighted that all ten countries were also on the list in the previous edition released in January.

Another Yonhap report, published Friday from Seoul, focused on the reaction of South Korea's Ministry of Finance and Economy, which said the government would maintain close communication with the U.S. Treasury Department. In a release, the ministry expressed plans to "deepen mutual understanding and trust regarding the foreign exchange market" and to "continue cooperation to ensure stability in the foreign exchange market."

A third Yonhap report, also filed from Washington, reiterated the list composition and explained the criteria for inclusion, pointing to the U.S. Trade Facilitation and Trade Enforcement Act of 2015.

Key Claims

All three Yonhap reports agree that South Korea had been excluded from the monitoring list in November 2023, for the first time since it was added in April 2016, but was placed back on the list in November 2024 and has remained on it since.

The reports also describe the criteria for placement on the list. According to Yonhap, a trading partner is placed on the monitoring list if it meets two of three thresholds: a bilateral trade surplus with the United States of at least $15 billion; a material current account surplus of at least 3 percent of GDP; or persistent, one-sided intervention in the foreign exchange market for at least eight months in a 12-month period, with net purchases exceeding 2 percent of GDP while last 12 months. Yonhap reports that South Korea met the first two criteria.

On the economic grounds for inclusion, the Treasury report said South Korea's current account surplus grew to 6.6 percent of GDP last year, up from 5.3 percent in the previous year, largely driven by goods trade, particularly in semiconductors and other technology products. The Korean won has come under sustained depreciation pressure.

The Treasury report noted that the department had previously stated in January that the won's depreciation pressures were not in line with Korea's strong economic fundamentals. The ministry quoted the report as acknowledging "that the recent depreciation pressures were not in line with Korea's strong economic fundamentals." The report also observed that Korean authorities' foreign exchange intervention appeared focused on smoothing excess volatility amid the depreciation pressure.

The South Korean finance ministry did not specify any criteria that might have been unmet, but emphasized its intention to maintain close communication with Washington.