ID :
178509
Thu, 04/28/2011 - 09:50
Auther :

Seoul mulls steps to curb won's ascent: official

(ATTN: ADDS details from 4th para) SEOUL, April 28 (Yonhap) -- South Korea is considering measures to counter its currency's appreciation stemming from the recent spike in short-term foreign borrowing and speculative currency forward trading, a senior financial official said Thursday. "Since the start of this year, foreign debts have been growing fast with short-term borrowings leading the overall debt increase," Deputy Finance Minister Choi Jong-gu told reporters. "The situation has reached a point where we are worried and have to pay close attention." Choi said that the government will take necessary steps based on the results of an investigation that financial authorities recently launched into local banks' practices of trading currency forwards. The investigation will be completed early next month, he added. He especially pointed out that speculative trading of non-deliverable forwards (NDF) are behind the recent hike in the Korean currency, saying that the government will come up with appropriate countermeasures. "We believe that most of the recent NDF trading has been driven by speculative transactions seeking to take profits from exchange rates," Choi said. "The government will draw up necessary countermeasures both from short- and long-term perspectives." South Korea's currency has gained 5.3 percent against the U.S. dollar so far this year, becoming one of the world's most appreciating currencies, Choi said. He, however, noted that the government does not want to set the direction for the won's movement but to secure its stability. "The main task of the government is to reduce market volatility," he added. His remarks come as South Korea has been intensifying its efforts to reduce market volatility caused by excessive cross-border capital flows by tightening regulations on short-term foreign borrowing. In a related move last year, the government restricted the amount of currency forwards deals held by foreign banks' local branches to 250 percent of their equity capital. Choi said that the government is considering lowering the ratio. The government also plans to impose a levy on banks' non-deposit foreign currency borrowings starting in August in a bid to curb excessive capital flows.

X