(ATTN: UPDATES with decline in won and stock market in paras 6-8, 10-11; ADDS photo)
By Kim Kwang-tae
SEJONG, Aug. 6 (Yonhap) -- South Korea said Tuesday it will take bold steps to stabilize its financial markets in case of increased volatility, signaling Seoul's possible intervention in the foreign exchange market.
The move came after the United States designated China as a currency manipulator in an escalating trade war between the world's two biggest economies.
South Korea said it will closely monitor the foreign exchange market amid growing uncertainty over the U.S. decision.
"We will take steps in a swift and drastic manner to stabilize financial markets under a contingency plan in case of sharp volatility," Bang Ki-sun, deputy minister of economy and finance, said in a meeting with relevant officials in Seoul.
Bang's comments suggest that South Korea could intervene in the foreign exchange market to stem the sharp decline of the local currency against the U.S. dollar.
The local currency was changing hands at 1,218.65 won with the U.S. dollar as of 9:47 a.m., down 3.35 won from the previous session's close.
On Monday, the won closed at 1,215.30 to the greenback, the lowest in over three years.
South Korea said the won declined excessively in sync with the weakness of the Chinese yuan. China let its yuan slip through its long-guarded line of 7 per dollar for the first time in 11 years, in an apparent response to Washington's escalation of their trade dispute with additional tariffs.
South Korea's financial authorities sold US$187 million in the second half of 2018 to help stabilize the market, the Bank of Korea said in March.
Also Tuesday, the benchmark Korea Composite Stock Price Index fell 31.71 points, or 1.63 percent, to 1,915.27 as of 9:47 a.m., after dipping to as low as 1,891.81 points.
Seoul-Tokyo ties tipped for deeper rift after Japan's expanded export control: experts
Trade row with Japan, another headwind for Korean economy
Japan hides true intentions, leaving export curbs unjustified
Boycott of Japanese goods to intensify as Tokyo expands export curbs
Japan's broader export curbs aim for S. Korea's Achilles heel