Stop fueling uncertainty in the exchange market

The Korean won briefly touched below the 1,400-threshold against the U.S. dollar, a level visited during three crises — the 1997 Asian financial crisis, the 2008 global financial crisis, and the steep U.S. tightening period of 2022. With the Japanese yen also in a steep freefall, finance ministers of Korea and Japan expressed concerns about the pace of dollar strength and the impact on their currencies on the sidelines of the G20 finance ministers and central bank governors’ meeting in Washington.

Following the meeting of finance minister Choi Sang-mok and his Japanese counterpart Suzuki Shunichi, the two governments expressed their intention to “take appropriate actions against excessive forex movement” in what the market perceived as a rare joint verbal intervention. But the won’s revisit to the 1,400 crisis-time level should not be that feared, as it is sparked by the strengthening of the greenbacks on escalated geopolitical risks in the Middle East and delayed cuts in the interest rate.

Still, the won’s weakening had been steeper than other Asian currencies. Remittance of dividend income worth 9 trillion won by foreign shareholders that mostly fall in April partly fanned the dollar demand. But the currency’s fragility reflects concerns about economic fundamentals in the face of high oil prices on top of high interest rates and inflation. The build-up of delinquency in project financing, sluggish domestic demand, and skepticism in public policy drive following the election defeat all played to weigh down the currency value. The International Monetary Fund kept its growth outlook on Korea for this year unchanged at 2.3 percent while lifting the estimates for the U.S. growth to 2.7 percent from 2.1 percent and global growth to 3.2 percent from 3.1 percent three months ago.

An exit from high interest rates has been delayed across the world due to the resilient U.S. economy, delivering upsets to the global markets which had bet on rates going lower in the first half. Wars and economic performance in the U.S. are something beyond our control. Authorities can best keep their eyes on the market to intervene to correct excessive bias.

But the government must be extra vigilant against negative signs in the market. Government bond dues upon maturity amount to 102 trillion won next year.

And yet, Democratic Party leader Lee Jae-myung reiterated the party’s campaign promise of handing out 250,000 won to every citizen. Such stimuli action requires a supplementary budgeting of 13 trillion won and can cost the confidence of domestic and foreign investors. Lee said he had been frustrated by the president’s address. But his idea of gaining popularity at the expense of damaging the public finance and national credibility won’t please that many people.