December 2, 2022

S. Korea’s finance minister says further currency stabilization measures are underway

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SEOUL, Sept 25 (Reuters) – South Korea’s finance minister said the government would prepare more measures to stabilize the foreign exchange market, while downplaying the need for a currency swap deal with the United States .

The measures include using the government’s foreign exchange equalization fund to meet shipbuilding companies’ requests for foreign exchange hedging for their overseas orders, thereby increasing the supply of dollars in the onshore spot market, a said Choo Kyung-ho during a television interview on Sunday.

This is one of several measures authorities have been considering to mitigate volatility in the foreign exchange market, Choo said, as the South Korean won has weakened against the dollar at a much faster rate than the most of his peers in recent days.

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Once in place, the measure will induce some $8 billion of dollar supply in the local currency market by the end of the year, according to a separate statement issued by FX authorities.

It follows a $10 billion currency swap deal between the country’s central bank and the state pension fund announced on Friday, a tool that allows the fund to finance its overseas investments with foreign exchange reserves. from the central bank, instead of buying dollars on the spot market. .

Authorities are also considering ways to help stabilize the currency market by introducing measures related to local residents’ financial assets held abroad, a finance ministry official told Reuters, without providing details.

Minister Choo, when asked about the possibility of a currency swap agreement between the Bank of Korea and the US Federal Reserve, said that it would certainly be helpful for the local foreign exchange market, but it is not not yet urgent under current market conditions.

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Reporting by Jihoon Lee and Yena Park; Editing by Chris Reese and William Mallard

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