By Jihye Lee and Fabiana Negrin Ochoa


South Korean authorities urged banks to step up measures against what they described as "speculative market-disrupting behavior," after the won slumped to its weakest level since 2009 amid escalating Middle East tensions and speculation the Federal Reserve could raise rates by the year-end.

The Financial Supervisory Service, the country's financial regulator, held an emergency meeting Monday with Bank of Korea officials and executives from major domestic lenders, including KB Kookmin Bank, Shinhan Bank, Hana Bank and Woori Bank.

The Bank of Korea and the Financial Supervisory Service will conduct inspections, with strict measures to be imposed if warranted, according to a statement. Authorities also warned against profit-taking activities that capitalize on a weaker won.

Participants discussed the need to closely analyze the impact of offshore nondeliverable forward, or NDF, trading on the domestic foreign-exchange market, the FSS said. The regulator added that it had asked participating banks to actively cooperate with the effort.

Korean branches of HSBC and Standard Chartered also attended the meeting, the FSS said.

The latest measures to support the currency were announced hours after authorities issued fresh verbal warnings against volatility in the forex market, citing speculative activity in NDF products.

Officials said excessive volatility and one-sided market moves wouldn't be tolerated. The comments provided some support for the won, with the dollar recently trading at 1,533.00 won, compared with 1,539.10 won late Friday.

South Korean officials said over the weekend that they stood ready to intervene to curb excessive volatility and speculative trading.

"Market volatility can increase again depending on the Middle East developments as well as inflation trends in the U.S., and we will watch markets with heightened vigilance over the next 24 hours," said Deputy Prime Minister Koo Yun-cheol on Sunday.

Officials also pledged to investigate illegal foreign-exchange transactions by exporters and importers through lead-and-lag practices--such as accelerating import payments or excessively delaying export receipts--activities the government has vowed to crack down on.

The move marks the latest effort by Asian authorities to defend their currencies as the conflict in the Middle East fuels risk-off sentiment, boosting the dollar at the expense of emerging-market currencies. Renewed tariff proposals floated by the Trump administration have added to pressure on regional foreign-exchange markets.

Last week, India's central bank announced a raft of measures to support the rupee, while Indonesia's monetary authorities have repeatedly intervened to bolster the rupiah.

The rupee has shed 6.1% against the dollar so far this year, the rupiah has tumbled 9% and the won has lost 6.7%.


Write to Jihye Lee at jihye.lee@wsj.com and Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com


(END) Dow Jones Newswires

06-08-26 0439ET