The won-dollar exchange rate surpassed 1480 won intraday for the first time in eight months due to the strong dollar and other factors.

The won-dollar exchange rate surpassed 1480 won intraday for the first time in eight months due to the strong dollar and other factors. Consequently, the government's messaging surrounding the won-dollar exchange rate has become even more cautious.

On the 15th, Lee Bok-hyun, Chairman of the Financial Services Commission, stated, "To calm market instability, we have decided to operate a market stabilization program exceeding 100 trillion won next year as well. Our economy's crisis response capabilities are sufficient."

However, the financial industry flatly commented, "The policies currently in place are merely mechanisms to delay the crisis, not prescriptions to change its direction."

The core mechanism operating beneath the surface of the market is the so-called 'strategic currency hedging' managed in cooperation between the Bank of Korea and the National Pension Service. Simply put, it is a 'back-door transaction.'

This involves handling the dollar demand that inevitably arises as the National Pension Service expands its investments in overseas stocks and alternative assets outside the foreign exchange market. It is a structure where the National Pension Service borrows dollars from the Bank of Korea's coffers to avoid leaving behind a large dollar purchase order in the market.

While not illegal and institutionally permitted, it is effective in buffering short-term, sharp currency appreciation.

However, an industry insider stated, "This mechanism is merely a temporary measure to prevent the exchange rate from skyrocketing. It has no power to fundamentally reverse the trend of the exchange rate. This is textbook knowledge that everyone is aware of. The real problem lies beyond this."

Interpreting the recent remark by Bank of Korea Governor Rhee Chang-yong, "Extending the currency hedging period is not an issue. The problem is 'how much' we spend," implies that "there is a limit to the total amount of dollars that can be injected."

Editorial Department, Hanmiilbo