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(LEAD) Seoul to take steps to stabilize market over volatility

Economy 10:19 May 20, 2019

(ATTN: RECASTS throughout with quote and more details; ADDS photo)

SEJONG, May 20 (Yonhap) -- South Korea will take "appropriate" steps to stabilize its financial markets in case of increased volatility, signaling Seoul's possible intervention in the foreign-exchange market.

Hong Nam-ki, the minister of economy and finance, said South Korea will strengthen the monitoring of financial markets and take preemptive actions against a risk factor amid the escalating trade frictions between the United States and China.

The U.S. has raised its import tariffs to 25 percent from 10 percent on US$200 billion worth of Chinese products. In a tit-for-tat response, China has announced that it will levy higher tariffs on $60 billion worth of U.S. goods.

"We plan to maintain market stability through appropriate measures for stability if volatility increases due to an excessive one-sided movement in financial markets," Hong said in a meeting with officials in Seoul.

Hong Nam-ki, the minister of economy and finance, speaks in a meeting with officials at a government building in Seoul on May 20, 2019. (Yonhap)

Hong did not elaborate on what he meant by appropriate steps, but his comments suggest that South Korea could intervene in the foreign-exchange market to stem the decline of the local currency against the U.S. dollar.

Last Friday, the local currency closed at 1,195.70 won to the dollar, marking a 28-month low against the greenback over the trade frictions between the United States and China.

The local currency was trading at 1,192.10 won against the greenback as of 9:15 a.m., up 3.6 won from the previous session's close.

South Korea's financial authorities sold $187 million in the second half of 2018 to help stabilize the market, the Bank of Korea said in March.

Hong also said any fallout from the trade frictions between the world's two largest economies could seriously affect South Korea. The U.S. and China account for a combined 39 percent of South Korea's exports.

Hong said South Korea will try to diversify its export markets by speeding up its talks with the Philippines, Malaysia and Indonesia on forging free trade agreements.

South Korea has sought stronger economic ties with Southeast Asian countries to reduce its heavy reliance on large markets, like the United States and China, and to foster new growth drivers.

South Korea has clinched a series of free trade agreements with major trading partners, including the U.S. and China, as well as Chile, Peru, Colombia and the Association of Southeast Asian Nations in recent years as part of its efforts to boost the country's export-driven economy and diversify its export markets.


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