S. Korea says to take necessary steps if market volatility deepens

Source: Xinhua| 2019-08-06 14:21:04|Editor: ZX
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SEOUL, Aug. 6 (Xinhua) -- South Korea's finance ministry said Tuesday that it will take necessary steps if volatility in the financial market deepens, indicating a possible intervention in the foreign exchange market.

Bang Ki-sun, deputy minister of economy and finance, told in an emergency meeting with relevant officials that if the market volatility excessively expands, the government will take market-stabilizing measures rapidly and boldly under the prepared "contingency plan."

He noted that the government will closely monitor market situations, vowing to actively tackle excessive instabilities in the financial market.

His comments came after the won/dollar exchange rate jumped to the highest in more than three years on Monday, amid rising worry about the global trade dispute and a trade row between South Korea and Japan.

Japan removed South Korea last week from its whitelist of trusted trading partners that are given preferential export procedures, after tightening regulations in early July on its exports to South Korea of three materials vital to produce memory chips and display panels.

The South Korean currency opened at 1,220.0 won per dollar Tuesday, down 4.7 won from the prior close. The local currency trimmed earlier losses versus the greenback following the comment from the deputy finance minister.

The benchmark Kospi index declined more than 2 percent in the early trading, but also pared initial losses. The index retreated 2.56 percent on Monday.

Bang's comments were seen as an indication of the government's possible intervention in the currency market. The country's financial authorities sold 187 million U.S. dollars in the FX market in the second half of last year to stabilize the market, according to the Bank of Korea (BOK) data.

The deputy minister said global credit rating companies and foreign investors highly regarded the fundamental and the external soundness of the South Korean economy.

The South Korean government issued 1.5 billion U.S. dollars of sovereign bond in June, and Moody's kept its rating on South Korea at "Aa2," the third-highest level on the Moody's sovereign rating table, with a "stable" rating outlook in July, the deputy minister added.

South Korea's foreign currency reserves reached 403.1 billion U.S. dollars as of end-July, marking the world's ninth-biggest foreign reserves holder.

Premium on credit default swap (CDS), which gauges the sovereign default risk of the South Korean economy, was 33.31 basis points on Monday, lower than 39.5 basis points tallied at the end of last year.