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S. Korea ready to take measures to stem won's sharp fall

Economy 09:41 April 29, 2022

SEOUL, April 29 (Yonhap) -- South Korea plans to take steps to curb the Korean currency's "excessive" fall against the U.S. dollar, a senior government official said Friday.

First Vice Finance Minister Lee Eog-weon also dismissed the possibility of a sharp outflow of foreign capital, citing the country's strong economic fundamentals.

"Volatility in the won-dollar exchange rate has amplified amid fears about the Federal Reserve's aggressive rate hikes and economic growth concerns due to China's COVID-19 lockdowns," Lee said at a government meeting on the macroeconomics.

"The government will closely monitor the market and stick to the principle that it will take market-stabilizing measures if the won shows one-sided movement," he added.

This photo, taken April 28, 2022, shows an electric signboard with information about the KOSPI, South Korea's main stock index, and the won-dollar exchange rate at a dealing room in Hana Bank in Seoul. (Yonhap)

South Korean economic policymakers recently issued verbal warnings about the won's sharp fall. Despite verbal intervention by the finance minister, the Korean currency extended its losing streak to the sixth session Thursday.

But the won has gained ground against the dollar during Friday's trading. The Korean currency changed hands at 1,269 won to the dollar as of 9:24 a.m., up 3.5 won from the previous session.

The won's weakness has accelerated in recent sessions amid the prospect of the Fed's aggressive monetary tightening.

Fed Chairman Jerome Powell signaled a half percentage-point rate hike in next week's policy meeting as U.S. inflation jumped to a 41-year high in March. Last month, the U.S. central bank raised the policy rate by a quarter percentage point to 0.25-0.5 percent, the first rate hike since 2018.

Amid fast-rising U.S. interest rates, some market watchers voiced concerns about the narrowing interest rate gap between South Korea and the U.S., and slowing inflows of foreign funds.

Lee said there is a limited possibility that foreign capital will flee the Korean market, given South Korea's strong economic fundamentals and external credits, and its capability to absorb external shocks.

sooyeon@yna.co.kr
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