South Korea's financial industry said on Thursday it expects the recent sharp rise in the won-dollar exchange rate to pause after an unusual verbal intervention by the U.S. Treasury secretary on the won's weakness.

The U.S. Treasury earlier said Secretary Scott Bessent noted that the recent fall in the won did not match South Korea's strong fundamentals and stressed that excessive volatility in the foreign exchange market is undesirable.

Park Sang-hyun, an analyst at iM Securities, said in a report that excessive won weakness would be uncomfortable for the United States as well if annual investment into the United States worth $20 billion is to be faithfully carried out from this year depending on South Korea-U.S. tariff talks. He said the United States may have moved to coordinate with South Korea's foreign exchange authorities.

Park said the U.S. Treasury secretary expressing concern over the won's decline was likely to raise vigilance over additional government market intervention, and that the steep won weakening trend would pause for now.

He also noted that Japan has also made a verbal intervention in the foreign exchange market.

As the won has recently moved in tandem with the Japanese yen, if the yen rebounds, the decline in the won-dollar exchange rate is also likely to pause, he said.

Park said Japan's finance minister Satsuki Katayama said it would respond appropriately to excessive volatility, including speculative moves, without ruling out any means. He said it appeared aimed at reining in excessive yen weakness sentiment due to expectations for an early general election.

Park said the joint verbal intervention by the finance ministers of South Korea, the United States and Japan is expected to have a short-term effect, but it is uncertain how long it will last. He also forecast that the dollar-won exchange rate would show a gradual downtrend in the first half, citing the possibility of dollar weakness in the first half.

Lee Min-hyuk, an analyst at Kookmin Bank, said regional dollar long buying sentiment would ease in response to the U.S. Treasury's verbal intervention on the won.

Lee said if follow-up selling and remarks related to the foreign exchange market from Thursday's monetary policy meeting are added, the downside tilt would deepen further. He said dollar-won could enter the 1,450 won range intraday in that case.

But he said bargain buying after a sharp drop in the won-dollar exchange rate would support the lower end. He said the exchange rate on Thursday would show a stepwise decline pattern, with strong downward pressure and rebound buying.

[Yonhap]