Gov`t to tackle sharp currency swings: finance minister

(ATTN: UPDATES exchange rates in 4-5 paras; ADDS minister's comments in 8-10; AMENDS
headline)
SEOUL, Feb. 19 (Yonhap) -- The South Korean government is ready to take action to
support the local currency if its value suffers sharp fluctuations, 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 came amid the won's recent sharp descent. The local currency plunged
to a three-month low of 1,481 won to the dollar on a foreign sell-off on
Thursday, falling for the eighth consecutive session.
Amid financial uncertainty and worries about the global economy, the won has
fallen about 15 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 also dismissed the market rumor, saying that the current stockpiles of
around $200 billion in foreign reserves are enough to handle such a scenario.
Heeding the spreading jitters, however, the minister told lawmakers that he is
"closely" watching the market along with the nation's central bank and he could
consider issuing more foreign-exchange stabilization bonds if needed to help
tackle a dollar funding problem.
Striking an optimistic tone, 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 overall 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
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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