The South Korean government will allocate 15 trillion won in emergency management funds to support small and medium-sized enterprises facing a weakened currency [1].

This intervention comes as the Korean won hits levels not seen since the IMF crisis, threatening to drive up inflation and destabilize domestic businesses. The prolonged weakness of the currency against the U.S. dollar creates a volatile environment for companies dependent on imports.

The won-dollar exchange rate has remained above 1,500 KRW per USD since May 15, 2024 [1]. According to reports, the average exchange rate for the second quarter of 2024 also exceeded 1,500 [1]. This marks the first time in 28 years that the currency has maintained such a low value relative to the dollar [1].

Analysts point to a massive exodus of international capital as a primary driver of the currency's decline. Foreign investors sold more than 148 trillion won of KOSPI stocks during the first half of 2024 [1]. This large-scale sell-off has prompted portfolio rebalancing, which keeps the exchange rate high and puts downward pressure on the won [1].

Government officials are treating the 1,500-won threshold as a potential "new normal" for the economy [1]. The emergency funds are intended to provide a liquidity buffer for SMEs that are struggling with the increased cost of raw materials, and imported goods caused by the high exchange rate [1].

"The 1,500-won high exchange rate is becoming a 'new normal' for our economy," a YTN anchor said [1].

“The government will allocate 15 trillion won in emergency management funds to support small and medium-sized enterprises.”

The sustained weakness of the won indicates a shift in investor confidence and a structural challenge for South Korea's export-led economy. While a weaker currency can sometimes benefit exporters, the scale of the KOSPI sell-off suggests that foreign investors are hedging against broader systemic risks. The government's massive capital injection for SMEs is a defensive measure to prevent a wave of bankruptcies among smaller firms that lack the hedging tools used by conglomerates.