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The U.S. and South Korea agreed on Wednesday not to manipulate foreign exchange rates for trade advantage, but reserve them for combating excessive volatility. The decision doesn’t include a bilateral currency swap line. According to a joint statement released on October 1, the U.S. and South Korea reaffirmed their commitment to avoid manipulating the international monetary system, as outlined in the IMF Articles of Agreement. The initiative aims to present an effective balance of payments adjustment and unfair competitive advantage. Both parties aim to prevent unfair competitive advantage Washington and Seoul also agreed that any macroprudential or capital flow measures will not target exchange rates for trade advantage. The decision from both countries mirrors an agreement between the U.S. and Japan announced in August.  In Japan’s deal, there was no mention that foreign exchange rates had to be market-determined. Unlike the Japan deal, the U.S.-South Korea agreement stipulates that both countries will continue to monitor currency market stability. The statement also highlighted that government investment vehicles will invest abroad for risk-adjusted return and diversification purposes, and not to target the exchange rate for competitive purposes. South Korea’s National Pension Service, the world’s third-largest pension fund, was not explicitly mentioned in the statement. The fund has emerged as a point of concern during Seoul’s trade negotiations with Washington. The report revealed that the U.S. has kept South Korea on its list of countries to monitor for their foreign exchange policies. Seoul was removed from the list in November 2023 for the first time since April 2016, but reappeared in November 2024. According to the report, South Korea utilizes the NPS funds for exchange rate intervention, with the U.S. stating that its use of funds for foreign exchange hedging could impact the Korean won’s value. The U.S. Department of the Treasury noted…

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Filed under: News - @ October 1, 2025 7:26 am