South Korea Is Closely Monitoring Speculative, One-Sided Won Moves, to Sternly Respond If Needed

South Korea’s finance minister said authorities are closely monitoring any speculative, one-sided currency moves, underscoring the country’s readiness to act as the won trades near a seven-month low.

Fresh off a plane back from the G20 summit in South Africa, Finance Minister Koo Yun Cheol on Wednesday said officials will “sternly respond if foreign-exchange volatility excessively widens,” without elaborating on the measures.

The government has begun talks with key market players, including the state-owned National Pension Service, to establish a “new framework” for FX stability, he said in a briefing in Seoul.

The pressure to intervene more actively is intensifying as stock outflows and rising US investment by locals sent the won tumbling almost 4% this quarter, making it the biggest loser in Asia after the yen.

The won fell to the lowest since April this week, with Citigroup Inc. strategists saying the currency is nearing a threshold that could trigger US dollar sales by the .

A stable FX environment has a significant influence on the pension fund’s returns, and the new framework is not about mobilizing the fund to defend the won, but about establishing a long-term, fundamental alternative, Koo said, without elaborating.

Earlier this month, the government to “use all available tools” to support the won in coordination with pension fund. Authorities later discussed measures to balance the pension fund’s investment returns with foreign-exchange market stability, and held separate talks with stock brokerages.

Koo said he expects cooperation from exporters though no short-term incentives are under review.

Kim Jae-hwan, director general of the International Finance Bureau, also said the government will closely monitor FX volatility and take bold market-stabilization measures if needed, echoing the minister’s comments.

The National Pension Service, Korea’s largest institutional investor with about $530 billion of foreign assets, has often helped counter pressure on the won through hedging and FX operations. It sold dollars and bought the won this year.