Won Gains Following Intervention Signal
By Lee Hyo-sik
Staff Reporter
The local currency gained against the dollar Tuesday after the government hinted at intervening in the foreign exchange market if the won continued to lose ground beyond its current level.
The won was up against the greenback for the first time in 13 trading sessions Tuesday, closing at 1,014 won to the dollar, up 15.2 won from Monday. The benchmark KOSPI also closed higher at 1,588.75, up 14.31 points.
On Monday, the won shed 31.9 won to close at 1,029.2 won per greenback, its weakest level since Dec. 12, 2005, when it traded at 1,033.7 won. The currency also fell to its weakest point in three years and five months against the Japanese yen, closing at 1,061.58 won per 100 yen.
Strategy and Finance Minister Kang Man-soo, convened an emergency meeting at the presidential office Tuesday morning to signal that Seoul will no longer tolerate the downfall of the local currency. Bank of Korea Governor Lee Seung-tae and Financial Services Commission Chairman Jun Kwang-woo were also present at the meeting.
It is unclear whether the currency gained due to the intended government intervention.
A Cheong Wa Dae official said the government has decided to activate a task force to monitor the currency market, stressing that it will intervene if the market continues to remain volatile.
Earlier in the day, Shin Je-yoon, deputy finance minister for international affairs at the Ministry of Strategy and Finance, expressed concern about the pace of the won's depreciation and its repercussion on the domestic financial market.
``We are gravely concerned about the market instability. The government must team up with the central bank to closely monitor the currency market,'' he said. Shin also said the government will take appropriate measures if the market continues to remain unstable.
The local currency has been weakening against the dollar and the yen as foreign investors dump local stocks and convert the won into dollars before taking money out of the country amid the global financial market turmoil.
The country's worsening current account balance has contributed to the won's weakness, causing a supply shortage of dollars on the local currency market.
The weaker won is a bonanza for local exporters as their products become cheaper in dollars on overseas markets. But the weak currency has put additional upward pressure on already high consumer prices here, as the country has to pay more to import crude oil and other raw materials.
Many analysts are still puzzled over the depreciation of the currency against the greenback at a time when the dollar has hit all-time lows against major currencies, including the yen and the euro.