This paper analyzes the characteristics of the exchange rate fluctuations of major currencies in Korea and discusses the policy implications for its exchange rate system. The type of exchange rate regime has been at the center of economic debate due to economic globalization and liberalization. The choice of exchange rate regime has been regarded as critical to achieving sustainable economic growth and has important implications for the world economy.

While revaluation of the domestic currency results in decreased exports, a high unemployment rate and the distortion of overall production factor. Devaluation of exchange rate leads to the regulations of exports and the pressures of import liberalization from foreign countries, as well as price rise.

Accordingly, the Korean government should apply appropriate exchange rate policy in response to the currency crisis. The objective of this paper is to allow the government to participate in the foreign exchange market in a way that contributes to economic stability and promotes the development of the private sector's participation in foreign exchange.