South Korea will stabilize the foreign exchange market

SEOUL (Reuters) – South Korea’s top economic policymaker said the government planned to take action to stabilize the foreign exchange market, if needed, as the South Korean currency fell against the U.S. dollar at a rapid pace, Yonhap reported.

Finance Minister Hong Nam-ki made the verbal intervention as the Korean currency hit a more than two-year low against the greenback on Wednesday amid heightened external economic uncertainty.

“The government is closely monitoring the foreign exchange market with the aim of curbing excessive unilateral movements of the won, and it plans to make efforts to stabilize the market, if necessary,” he said.

The local currency finished at 1,265.20 against the greenback, down 14.4 from Tuesday’s close. It was the first time in more than two years that the won slipped to the 1,260 level. The won weakened further against the dollar yesterday, but its pace slowed markedly after Hong made the remarks. The won’s weakness came as demand for the dollar was fueled by expectations of aggressive monetary tightening by the Federal Reserve (Fed), the fallout from the 19 lockdowns of its major cities and the war in Ukraine. Fed Chairman Jerome Powell signaled a 0.5 percentage point rate hike at next week’s policy meeting as US inflation hit a 41-year high in March.

Last month, the U.S. central bank raised the benchmark rate by a quarter of a percentage point to 0.25%-0.5%, the first rate hike since 2018.

The South Korean currency has fallen about 6% to the dollar so far this year. The won has slipped about 2% against the dollar in the past three sessions alone.

South Korea’s foreign exchange authorities unloaded a net amount of US$6.89 billion (RM30 billion) in the fourth quarter of last year to ease volatility in the foreign exchange market.

The Bank of Korea and the Ministry of Finance have released quarterly figures on net sales or purchases of dollars in the foreign exchange market since the third quarter of 2019. — The Korea Herald/ANN