Gov`t to take action against sharp currency fluctuation: finance minister

SEOUL, Feb. 19 (Yonhap) -- The South Korean government is ready to take action to
support the local currency if the market suffers sharp fluctuation, the nation's
top economic policymaker said Thursday.
"Recently, the won-dollar exchange rates are showing unstable moves in the
mid-1,400 won range on bleak earnings reports in the banking sector and lingering
uncertainty over the impact of the U.S.-led financial rescue plans," Finance
Minister Yoon Jeung-hyun said in a statement submitted to the National Assembly.
"The government will respect movements determined by market players but it will
make smoothing efforts in case the market suffers a sharp fluctuation," he added.
His remarks come as the local currency plunged to the lowest level in more than
two months on Wednesday as investors dumped assets here in pursuit of safer ones
amid renewed concerns over a credit crisis.
The won has been on the decline for seven straight sessions, with its value
falling about 14 percent against the dollar so far this year.
Market jitters deepened as rumors circulated that a chunk of foreign
currency-denominated bonds issued by local banks will mature in March, raising
fears that banks will not be able to pay back the debts amid a dollar shortage.
On Tuesday, Vice Finance Minister Hur Kyung-wook brushed off the rumor as
"excessive," saying the nation has sufficient foreign reserves to cope with any
contingency.
Yoon forecast that the nation's improving current account balance and easing
foreign sell-offs in local stock markets will help stabilize the exchange rate
down the road.
The minister, however, remained downbeat about the economy, saying that it is
slowing "at a faster-than-expected pace" mainly due to worsening external trade
conditions. The government will craft an extra budget enough to stimulate sagging
domestic demand and expedite an economic recovery, he added.
Earlier he predicted the economy, Asia's fourth-largest, will contract 2 percent
for this year, the first negative growth in more than a decade, citing slumping
exports and domestic demand.
kokobj@yna.co.kr
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