S. Korea may move to stabilize currency: finance minister

(ATTN: UPDATES with more details in paras 11-13; ADDS comments on inviting N. Korea
to G20 meeting from para 14)
SEOUL, Oct. 23 (Yonhap) -- South Korea may take steps to deal with distortions in
the foreign exchange market that have the potential to harm the national economy,
the nation's top economic policymaker said Friday.
"Seoul will not stand idle in the face of distortions in the exchange rate,"
Finance Minister Yoon Jeung-hyun told lawmakers during a parliamentary audit.
The remarks come a day after he acknowledged the Korean won's rapid ascent
against the dollar in recent weeks, raising concern over the price
competitiveness of locally made products that can hurt exports.
The Korean currency has gained about 33 percent versus the dollar since March on
the strength of the country's growing trade surplus and as foreign investors
snapped up local shares.
The minister, however, stressed that it is not appropriate for the government to
announce its stance on foreign exchange issues and made clear any action will be
limited to implementing so-called smoothing operations to prevent sharp
fluctuations.
The official also said that he is not in a position to comment on the possibility
of making verbal warnings that can influence the foreign exchange market.
On the prospect of South Korea implementing a so-called exit strategy to reel in
excess liquidity, the official reiterated that policymakers plan to examine all
possibilities in the first half of 2010.
He said without going into detail that when such actions are taken Seoul may move
more swiftly compared to developed economies in some areas, while taking more
careful steps in other fields.
South Korea, like many other countries, injected large sums of money to push
forward stimulus programs aimed at coping with the worldwide financial crisis
caused by the Lehman Brothers collapse last year. Such actions have helped
stabilize the economy, but there are now concerns that excess liquidity could
trigger inflationary pressure down the road.
The finance minister added that in order to achieve a fiscal balance in
2013-2014, efforts must be made to start cutting unnecessary spending in the
public sector. He said a rough balance between spending and earnings should be
reached around 2011.
Yoon also said that the government will start discussing ways to revamp the
country's financial supervisory system next year. "The discussion will touch on
foreign exchange, responsibilities for monitoring the global financial market,"
he said.
He hinted the government could weigh a possible merger or readjustment of
jurisdiction over financial oversight, currently dispersed between the finance
ministry and the Financial Supervisory Commission. Such a division has been cited
for inefficiency and a failure to respond quickly to sudden changes in the
market.
Yoon, meanwhile, said a North Korean delegation may be invited to the G20 meeting
that South Korea will host in November 2010.
"It is customary for the chairperson of the annual meeting to invite a few
non-members to the gathering although no decision has been reached on the guest
countries for next year," he said.
He said that asking North Korea to attend the G20 as an observer is one of many
options that can be explored.
His remarks come amid growing speculation that South and North Korea may have
engaged in talks that could lead to another summit meeting to help resolve
outstanding issues like Pyongyang's nuclear ambitions and inter-Korean
cooperation.
Leaders from the two Koreas have met twice before in 2000 and 2007, during a
decade of liberal rule in South Korea when the country maintained a conciliatory
stance towards the North.
Cross-border relations cooled after conservative President Lee Myung-bak took
office early last year.
yonngong@yna.co.kr
(END)