South Korea Lifts 14-Year Ban on "Kimchi Bonds" to Attract Hedging Capital Inflows

Fueled by the speculative frenzy surrounding U.S. dollar stablecoins and in an effort to attract hedging capital inflows, South Korea has lifted a 14-year ban on domestic financial institutions purchasing "Kimchi Bonds" (foreign currency bonds issued onshore, designed to be converted into Korean won). Previously, the Bank of Korea (BOK) had prohibited local investment in such bonds in 2011 due to concerns about currency mismatch risk. Now, with retail investors flocking to overseas stock markets and the U.S. dollar stablecoin market, leading to a weaker won and insufficient foreign currency liquidity, the BOK has adjusted its policy. The BOK stated that this measure will improve foreign currency liquidity, alleviate pressure on the won's depreciation, and address imbalances in foreign exchange supply and demand. (Financial Times) [Odaily Planet Daily]