Finance Minister Yoo Il-ho told reporters that while South Korea won't be branded as a currency manipulator under the current criteria used by the Treasury, there could be "problems" if the U.S. decides to change such determinants.
"Those problems cannot completely be ruled out, as there is a new administration," Yoo said, adding that currency volatility could increase if the country was branded as one.
Yoo's declaration came despite the country having close trade ties with the U.S.. A free trade agreement between the two countries came into effect on March 15, 2012 and was once hailed as the model for the Trans-Pacific Partnership, which President Donald Trump has criticized.
Westpac Bank's senior currency strategist Sean Callow told CNBC Friday that the U.S. would consider the scale of South Korea's intervention before labelling the country as a manipulator.
"The intervention is there, maybe the IMG is asking them to be more opened about how much they're actually doing so," Callow said on CNBC's "Street Signs".
"It's hard to know how much they're doing. I would be surprised if there isn't some because the dollar-won has been at some pretty key levels. It's not that unusual to get in when there's a particular level that might cause a cascading in price action but it's that persistence that really, at this point, probably not large enough to get the label on the current legislation."
The U.S. Treasury designated Taiwan and South Korea as currency manipulators in 1988, the year that Congress enacted the currency review law. China was the last country to get the designation, in 1994.
A formal declaration that any other country manipulates its currency requires the U.S. Treasury to seek negotiations to resolve the situation, a process that could end in punitive tariffs on the offender's goods.
- Reuters contributed to this story.