Seoul denies charge of currency manipulation

A senior government official denied a claim by the U.S. Treasury that Seoul was manipulating its currency, saying the Korean government intervenes in currency markets only with so-called smoothing operations.

“We do not intervene in the currency market by setting a certain level or goal,” a high-ranking official at Korea’s Ministry of Strategy and Finance said by phone. “Our intervention is limited to smoothing operations, when currency markets show some extreme conditions such as a spike in the won against dollar. Those actions are also done by other countries.”

In a report released Thursday titled “Report to Congress on International Economic and Exchange Rate Policies,” the Treasury Department said Korea intervened in the foreign exchange market to intentionally weaken its currency to boost exports.

“The Korean authorities have intervened to resist won appreciation in the context of a large and growing current account surplus,” it said. “After reducing their presence in the foreign exchange market from August through November, Korean authorities appear to have substantially increased intervention in December and January, a time of appreciation pressure on the won.

“We have made clear that the Korean authorities should reduce foreign exchange intervention, limiting it to the exceptional circumstance of disorderly market conditions, and allow the won to appreciate further.”

The senior Finance Ministry official said the Korean government would not respond to the comment because the report was informal.

“The report was just between the U.S. government and the Congress for their reference,” the official said. “We would not issue an official statement or response to it.”

In October 2014, the Treasury Department also asserted Korea deliberately devalued its currency.

“The Korean authorities intervened heavily in the foreign exchange market between May 2014 and July 2014,” it said in the October report. “The intervention in early July, together with public statements by government officials noting concern about currency volatility helped push the won back to 1,032 on July 16.”

The Thursday report came after statistics show Korea’s exports to United States jumped 13.3 percent in 2014, recording $70.8 billion, according to the Ministry of Trade, Industry and Energy report released in April.

Between January and March of this year, Korea’s trade surplus with the United States grew as Korea’s exports to the U.S. rose 16.5 percent to $15 billion, while U.S. exports to Korea dropped 8.9 percent to $9 billion.

“While the won appreciated against other currencies such as yen, it still appears to be undervalued for Washington against dollar,” said Jeong Dae-hee, a research fellow at the Korea Development Institute, by phone. “A strong dollar could dampen their exports to Korea, so the U.S. Treasury is indirectly pressing Seoul to allow won to appreciate.”

The Thursday report also indicated that Korea does not publicly report foreign exchange market intervention, while other developed countries.

Jeong said the reason why emerging countries are reluctant to reveal the information is because they worry that their intervention would spark massive speculation in the currency market.

BY KIM HEE-JIN [kim.heejin@joongang.co.kr]