Currency volatility to be eased if necessary: BOK

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Currency volatility to be eased if necessary: BOK

Korea will make efforts to stem volatility of the local currency if herd behavior is spotted in the foreign exchange market, the top central banker said Friday.

“The foreign exchange rate is basically determined in the market, but the FX authorities will make efforts to ease currency volatility if lopsided behavior occurs in the FX market,” Bank of Korea Governor Kim Choong-soo said in a seminar.

His remarks came after Korea announced last week its plan to further lower the ceiling of banks’ currency forward positions by 25 percent amid the local currency’s gain.

The government warned that it could take further actions if needed, raising speculation that it may tinker with strengthening the current macro-prudential measures, including bank levies.

The Korean currency has appreciated more than 6 percent against the greenback so far this year on the back of the current-account surplus and foreign capital inflows.

A stronger won helps ease upward pressure on import prices, but it is also feared to crimp exports, which account for about 50 percent of the Korean economy.

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