Korea was not immune from the global financial crisis that sprung out of the US sub-prime mortgage crisis in 2008. It experienced both a dry-up in foreign liquidity and a considerable depreciation in the won, in large part as a result of a sudden stop of capital flows. Unlike the foreign liquidity crisis of 1997, the latest crisis was sparked not by a fixed exchange rate regime or an overly leveraged corporate sector, but by Korea's extensive exposure to global financial markets. In light of this, we examine both how this situation arose and ways to build a more resilient foreign exchange market in order to prevent such a crisis from happening again. Regarding the foreign exchange market, we explore the consequences of increased capital inflows, the procyclicality of capital flows, and exposure to global liquidity shocks. We also look at foreign exchange policy in terms of regulations on positions and liquidity, management of foreign reserves, and market intervention. We then suggest ways to improve both micro and macro foreign exchange policies, such as through foreign liquidity regulations and expanding foreign reserves.