[EDITORIALS]Enough said, Mr. ParkAs the won-dollar rate falls dramatically, one comment by the Bank of Korea governor further fueled the won’s surge. Governor Park Seung said, “The government and the central bank are not intervening in the market” at a press conference yesterday. Such a comment sent a message to the foreign exchange market that the central bank is in effect allowing the won to soar to new highs. The won surged immediately, causing a big commotion in the foreign exchange market.
As a result, the won closed yesterday with a gain of more than 10 won against the dollar from the previous trading day.
Korea’s exporting companies are now facing 10 additional won of losses for each dollar because of Mr. Park’s inappropriate remarks. We have in effect written off 250 billion won ($250 million) when our monthly exports amount to $25 billion, for example.
Mr. Park has already hinted that the government would not make active attempts to curb the advancing won when he said, “The Korean economy has matured enough to absorb the impact of a falling won-dollar rate.” It would have been enough for the Bank of Korea governor to make such a comment on the foreign exchange rate and leave it at that. There was no reason for him to reveal whether or not the central bank actually meant to intervene in the market, he did not need to. But Mr. Park did not take the opportunity to keep his mouth firmly closed.
The bigger problem is that such a series of inappropriate remarks by Mr. Park could tarnish the credibility of the central bank and reduce the impact of its policies. Policies on the foreign exchange rate or interest rates can work only when they can be trusted. On the contrary, it will require more cost if the bank loses its credibility but wants to make its policies have the planned impact on the market. And that is why the heads of central banks in any country take extra caution in their comments on interest rates or exchange rates.
Mr. Park has caused a number of stirs by his inappropriate remarks since he took the helm at the bank. As a result, even the employees of the central bank are saying the bank chief needs to refrain from making public comments, and Mr. Park himself has pledged to take extra caution when making public remarks.
But he has slipped again, and Mr. Park should take full responsibility. We urge him not to cause any more losses to the country through his verbal mistakes.