South Korea’s foreign-exchange authorities pledged to step in to stabilise the won on Friday after the currency slid to its weakest level in seven months, triggering concerns in Seoul about growing volatility and structural pressure on dollar funding.
Local dealers told Reuters they suspected authorities had already sold dollars in the market following comments from the finance ministry warning about the rapid depreciation. Finance Minister Koo Yun-cheol said senior economic officials had agreed that the government must craft measures to address what they see as a persistent imbalance between domestic dollar demand and supply.
The ministry said officials were alarmed by the won’s drop beyond ₩1,470 per dollar, attributing part of the weakness to a surge in overseas investment by Korean residents. The currency has been under sustained pressure for months amid uncertainty surrounding a US$350 billion investment package linked to a trade deal with the United States. On Thursday, the won touched 1,475.4 — its weakest level since April.
Authorities plan to discuss stabilisation tools with the National Pension Service — the world’s third-largest pension fund and a major source of outbound capital flows — as well as with large exporters. The won strengthened sharply after the ministry’s statement and speculation of intervention.
This article was written by Eamonn Sheridan at investinglive.com.