Measures to stabilize won take effect

The Korean currency’s volatility reached a four-year low in 2011 as a set of measures helped reduce sudden capital outflows from the country, the central bank said yesterday.

The average daily volatility of the local currency reached 7.2 won in 2011, a mild decline from the previous year’s 9.5 won and its lowest figure since 3.0 won in 2007, the Bank of Korea (BOK) said in a statement.

“While Korea’s economic fundamentals were already solid, the implementation of new policies to reduce the abrupt outflow of large capital improved its macroeconomic soundness,” the BOK said.

Korea’s currency swap deals with China and Japan last year also helped its financial markets weather external shocks, the bank added.

The won, however, showed an increase in volatility towards the end of the last year as Europe’s debt crisis resurfaced and geopolitical risks from North Korea rose following the death of its longtime ruler.

The won’s daily volatility averaged at 9.3 won in the final quarter of 2011, widening from 8.2 won in the previous quarter, according to the central bank.

The currency has a relatively high level of volatility as the country’s foreign exchange market has not grown enough to absorb external shocks, and remains exposed to excessive capital flows.

Meanwhile, the daily volume of foreign exchange trading at local banks rose 9.4 percent in 2011 from the previous year, the fastest clip since the data was compiled in 1996.

Daily volume averaged $21.29 billion in 2011, up from $19.46 billion in the previous year, according to the BOK. Yonhap