Korean finance minister admonishes speculators, vows coordinated response

Finance

Published: 05 Sep. 2022, 17:01 Updated: 06 Sep. 2022, 15:00

Korean finance minister admonishes speculators, vows coordinated response

An electronic sign board at a Hana Bank in central Seoul shows won-dollar currency exchange rate on Monday. [NEWS1]

The finance minister said the government stood at the ready as the won's precipitous decline continued, and he again threatened speculators betting against the currency.

We will "sternly and timely respond to actions disturbing the market," Finance Minister Choo Kyung-ho said at a meeting held in central Seoul to discuss the economy on Monday.

That day, the won traded at 1,375 to the dollar. It hasn't been at these levels since April 2009 and has declined 18 percent in value against the dollar over the past year.

The currency's fall is wreaking havoc on the economy. It is in part responsible for the trade deficit, putting the central bank under pressure to raise rates, fueling inflation and stressing the balance sheets of companies that have borrowed heavily in dollars.

Foreign reserves fell $2.2 billion to $436.4 billion in August, down from the $469.21 billion record hit in October 2021.

Choo insisted that the economy and the markets are in good shape and blamed external factors for the volatility. He said that companies were able to raise funds in the overseas bond markets without much difficulty.

"Complex crisis situations are continuing amid monetary tightening in key countries, anxiety over financial markets and concerns about the economic slowdown, while global inflation persists," Choo said.

"Inflation has slowed a bit, but difficulties in the financial markets and real economy persist," he added, saying that the typhoon is also affecting the economy, increasing inflation ahead of the Chuseok holidays.

Korea's consumer price index fell in August after rising steadily since January.

He said that any response to volatility would be coordinated.

Finance Minister Choo Kyung-ho, middle, and Bank of Korea Gov. Rhee Chang-yong, second from left, at a meeting held in central Seoul to discuss the economy on Monday. [BOK]

The ministry will "monitor the financial and foreign exchange market situations in real time and closely cooperate with related organizations," he said.

"As the chance of complex crisis situations have grown bigger, relevant organizations will jointly review the contingency plans based on different scenarios in the fields of finance, foreign exchange and real economy," Choo said.

The meeting was attended by Bank of Korea Gov. Rhee Chang-yong and Financial Supervisory Service Gov. Lee Bok-hyun. In regards to the rapid fall of the currency, the central banker noted that the won has fallen at a faster pace in the past.

Choo, Bang Ki-sun, vice minister of economy and finance, and the ministry in general have admonished speculators in recent months, with comments made or issued in August and in June warning those who get caught up in the selling frenzy.

In terms of actual policy, bond buying has been mentioned previously, and during Monday's meeting, Choo discussed support for those affected by rising rates.

BY JIN MIN-JI [jin.minji@joongang.co.kr]