Won Rebounds as NPS May Halt Dollar Sales, ING Sees Consolidation Ahead

The South Korean won has experienced a significant appreciation in value against the US dollar, but it appears that policymakers are now taking steps to temper this trend. Reports indicate that the National Pension Service may halt or even reverse its forward-market dollar sales, which had been driving the currency's gains.

This move follows adjustments made by NPS to its FX hedging in June as part of measures aimed at supporting the won. The USD/KRW pair recently rebounded from a low of 1335 after news of this potential shift in policy.

The developments suggest that policymakers are comfortable with the recent appreciation in KRW and are prepared to tolerate a pause in the currency's gains. ING expects a period of consolidation in USD/KRW and USD/JPY, arguing that lighter dollar selling in these two major FX pairs could underpin the broader dollar tone.