Lee says won likely to strengthen toward 1,400 per dollar within weeks

President Lee Jae Myung told reporters at a New Year’s press conference in Cheong Wa Dae that authorities expect the Korean won to strengthen to around 1,400 per U.S. dollar within "a month or two," signaling a near-term policy goal while acknowledging clear limits on unilateral action. "According to relevant authorities in charge, it (the dollar-won exchange rate) is expected to fall to around 1,400 after a month or two," Lee said, framing the projection as an official expectation rather than a guarantee.

Markets reacted immediately. The won firmed as traders adjusted positions, moving as much as 0.5 percent stronger to 1,468.8 per dollar after earlier touching a recent low at 1,481.4. A local currency trader captured the shift in sentiment: "The dollar-won rate fell sharply as traders unwound long dollar positions on the president’s comments." The intraday swing illustrates the leverage of clear public guidance in thin or sentiment-driven FX conditions.

Lee balanced reassurance with realism, cautioning that domestic policy tools alone will not stabilise foreign exchange markets. He noted that some market participants have described the persistently weak won as a "new normal" and stressed that Korea’s experience is tied to regional and global forces beyond Seoul’s immediate control. Officials have repeatedly pointed to U.S. monetary policy, global risk sentiment and synchronized moves among Asian currencies - notably weakness in the Japanese yen - as dominant drivers of recent exchange-rate moves.

The president said the government will continue to deploy available measures "within its capacity" and seek sustainable policy tools to reduce excessive volatility. Authorities have already rolled out a series of measures since late last year to support the won, and have framed recent depreciation as inconsistent with Korea’s economic fundamentals. Still, the administration signalled tolerance for some FX flexibility while attempting to curb disorderly moves that could feed inflation or disrupt financial markets.

For markets and policymakers, the announcement serves several functions. First, it provides a focal point for expectations: a 1,400-per-dollar benchmark and a one- to two-month timeline create a clear short-term target that can alter positioning. Second, it communicates the government's willingness to act, which can amplify the effect of limited interventions if markets believe further steps are credible. Third, by openly acknowledging constraints, Seoul seeks to manage expectations about the scope of any single government's ability to offset cross-border capital flows driven by higher U.S. rates or shifting risk appetite.

The policy challenge over the coming weeks will be sustaining the initial momentum without exhausting intervention capacity or creating volatility when conditions reverse. A durable appreciation toward 1,400 will likely require stabilising external drivers - including any change in Fed policy expectations or a rebound in regional currencies - in addition to domestic measures. Investors will be watching capital flow data, short-term rate spreads and developments in Japan and the United States for signs that the external environment is tilting in Seoul’s favor.

Lee’s remarks set a concise near-term expectation, but they also underscore a broader reality for emerging market currencies in 2026: domestic policy can influence outcomes, but global monetary and risk dynamics remain the primary determinants of exchange-rate paths.