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(LEAD) U.S. welcomes increased transparency in S. Korea's FX market intervention

Finance 00:56 December 17, 2020

(UPDATES with additional information, minor edits throughout)
By Byun Duk-kun

WASHINGTON, Dec. 16 (Yonhap) -- The United States on Wednesday welcomed steps taken by South Korea to increase the transparency of its foreign exchange intervention.

It also said the country's market intervention, along with other fiscal steps to help stabilize the economy, seems "warranted."

"Korea implemented comprehensive public health measures that limited the spread of COVID-19. Nevertheless, Korea's financial markets experienced volatility, and its growth outlook deteriorated as the pandemic spread worldwide," the U.S. Department of the Treasury said in a report to Congress that named Vietnam and Switzerland as currency manipulators.

The report is published every six months -- usually in April and October -- but the last report covering the second half of 2019 was issued in January.

South Korea, along with nine other countries, including Japan, Germany and Italy, were put on a monitoring list.

The Treasury Department noted that countries, once put on the monitoring list, will "remain there for at least two consecutive reports to help ensure that any improvement in performance versus the criteria is durable and is not due to temporary factors."

A country is put on the monitoring list when it is determined to have met at least one of three criteria set by the U.S. -- a bilateral trade surplus of more than US$20 billion with the U.S. over a 12-month period, a material current account surplus of more than 2 percent of the country's gross domestic product (GDP) over a 12-month period and net purchases of foreign currency worth more than 2 percent of GDP.

Regarding South Korea, the report said the country intervened in the foreign exchange spot market with net sales of US$9.1 billion over a one-year period ending in June 2020.

While noting the amount represented only 0.6 percent of South Korea's GDP, far less than the 2 percent threshold, the Treasury Department said South Korea continued to increase its transparency.

"Treasury welcomes Korea's steps to increase the transparency of its foreign exchange intervention, including by transitioning to quarterly disclosure from semiannual in December 2019," the report said.

"Given the slowdown in growth that was already underway prior to the pandemic, a stronger fiscal response seems warranted, particularly if growth wanes or further risks materialize," it added.


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