Senior official conducts virtual intervention in won-dollar marketPolicymakers have stepped up again to minimize negative effects on the local financial markets amid the eurozone debt crisis, following their efforts in early August.
Their key countermeasures included curbing steep depreciation of the Korean won versus the U.S. dollar.
As the won continued to lose ground against the dollar, a senior government official conducted a verbal intervention in the foreign exchange market Thursday.
“It is undesirable for the nation to see excessive fluctuation in foreign exchange rates (either appreciation or depreciation),” said Eun Sung-soo, a director general in charge of international finance at the Finance Ministry.
The de-facto verbal intervention by a foreign exchange policymaker came more than one year after the first half of 2010, though there has been low-key intervention among officials.
He said that policymakers are “closely monitoring the market” amid the situation under which the dollar gained by more than 30 won to reach 1.107.8 won on Wednesday from a trading session earlier.
Though the pace of the won’s depreciation has slowed for several minutes right after his remarks, the dollar rose again versus the dollar by 8.6 won to close at 1,116.4 won Thursday.
Earlier in the day, the nation’s chief financial regulator stressed that Korea will efficiently weather the fiscal woes in Greece and several other European countries.
Kim Seok-dong, chairman of the Financial Services Commission chairman, said at a forum in Seoul that any shocks to global markets will surely be felt in Korean markets.
“But I have no doubt that our markets are now more than resilient enough to deal with them and will only get more resilient as we continue to reinforce our market foundation,” he said.
He compared the local market situation to other major economies. “We have more flexibility in our policy response to crises, with sound fiscal health and adequate capacity for monetary policy.”
He told foreign participants in the forum that Korea’s foreign exchange reserves now stand more than $310 billion dollars.
“And the short-term external debt, which used to be above 50 percent of the total not long ago, has recently dropped below 40 percent,” he said.
He also said the overall bank soundness has significantly improved as well.
“The loan-to-deposit ratio which used to hover around 120 percent, has remained stable at below 100 percent. And the BIS capital ratio is now higher than 14 percent,” he said.
Meanwhile, the KOSPI gained 1.42 percent to close at 1,774.08 on the day after falling for the third trading session.
Though the benchmark KOSPI inched up, the stock market has been still suffering fluctuations due to massive selling spree among foreign investors.
A day before Seoul stocks tumbled 3.52 percent to 1,749.16 as investors sapped demand for trade-dependent market assets on the European fiscal saga.
By Kim Yon-se (
kys@heraldcorp.com)
