Government asks banks to report dollar transactions in real time

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Government asks banks to report dollar transactions in real time

The won depreciating to 1,399 won against the dollar on Friday. [YONHAP]

The won depreciating to 1,399 won against the dollar on Friday. [YONHAP]

The government is reportedly taking a more aggressive approach to stabilizing the volatile won-dollar exchange rate, which is now close to breaking 1,400 won against the greenback.
 
According to local news reports citing financial industry sources, the government has ordered commercial banks to report dollar transactions in real time.
 
The financial authorities reportedly called the banks directly to ask them to report dollar transactions, which is being interpreted as a warning to the market to refrain from excessive dollar purchases.
 
The government has not denied the reports.
 
The won’s value has been falling despite a warning last week from Finance Minister Choo Kyung-ho.
 
“The currency exchange is currently rising rapidly, which is increasing the anxiety of the people,” Finance Minister Choo said Thursday while appearing at the National Assembly. “We will take the necessary steps to stabilize the market if the situation tilts excessively to one side or the anxiety grows.”  
 
The Finance Minister stressed that the Finance Ministry, the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service are closely working together to review contingency plans against a ballooning won-dollar exchange.
 
The won momentarily stopped falling against the dollar when Choo's comment was first reported, but by the end of the day it had started to depreciate again.  
 
On Friday, the won at one point traded at 1,399 won against the dollar.  
 
As the market has showed little possibility of stabilizing, the issue of a currency swap resurfaced when the president’s office on Friday said there will likely be talks between President Yoon Suk-yeol and President Joe Biden during their meeting in New York this week.  
 
Choi Sang-mok, senior presidential secretary for economic affairs, said both sides have taken an interest in the issue of reopening a currency swap line.
 
"The leaders agreed during their summit in May to cooperate closely over the foreign exchange market and we also had talks between our finance ministers," Choi said. "We expect that some sort of discussion could naturally take place."
 
A $60 billion currency swap between the two countries expired in December 2021 and was not renewed.  
 
Although there were expectations that a currency swap deal could have been made during President Biden’s visit to Seoul in May or Treasury Secretary Janet Yellen’s visit in July, the deal never realized.
 
The won has depreciated 16.5 percent against the dollar since the beginning of this year.  
 
At the start of this year, the won was traded below 1,200 won against the greenback, and the speed of depreciation has increased in recent weeks, especially as foreign investors have begun selling off their stocks.  
 
With the exception of Sept. 13, foreign investors have been net sellers on the Kospi every trading day this month, with total sales amounting to 1.5 trillion won.  
 
The weakened Korean won has impacted the economy, especially on trade as the country has already reported a trade deficit for five straight months for the first time in 14 years.  
 
Despite exports continuing to grow, the depreciated won has significantly increased imports.  
 
The lowered won is also affecting inflation, which is now spilling over to consumer spending.
 
KB Securities in its latest report last week raised its average won-dollar exchange forecast for the fourth quarter from 1,350 won to 1,410 won.  
 
“Amid the absence of a point of resistance as instabilities both at home and abroad continue, we can’t rule out the possibility that the won will depreciate to close to 1,450 won against the dollar,” said Kim Hyo-jin, an analyst at KB Securities.  
 
The Korean government has been cautious about taking direct action in the foreign exchange market as it has consistently been placed on the U.S. currency manipulation watchlist since 2016, with the sole exception of the first half of 2019.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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