Minister Indicates Tolerating Weaker Won
By Yoon Ja-young
Staff Reporter
Strategy and Finance Minister Yoon Jeung-hyun indicated Wednesday that the government might tolerate a high won-dollar rate without intervening in the foreign exchange market.
Regarding the soaring won-dollar rate, Yoon said that it could be an engine in boosting exports if it is appropriately used. ``Exports, the basis for overcoming the economic crisis, should be ceaselessly monitored, and efforts should be made to turn the current account into a surplus this year,'' Yoon said at a weekly crisis management meeting.
The market interpreted the remark as an indication that the government will tolerate the recently soaring exchange rate.
The currency market has been rattled recently amid growing global concern that a second global financial tsunami may start in Eastern Europe. The Korean currency closed at 1,516 won per greenback, gaining only 0.3 won in value from the previous day.
The won has lost over 16 percent in value so far this year, making the local currency the most depreciated among major currencies
Since his inauguration, Yoon has refrained from intervening in the market, a major departure from his predecessor, Kang Man-soo.
Kang, who had to resort to exports to achieve President Lee Myung-bak's pledge of seven percent economic growth annually, made it clear that he preferred a weak won to enhance price competitiveness of Korean exports.
However, he ended in squandering over $60 billion-$80 billion in foreign exchange reserves, as the government soon had to pull down the won-dollar rate, which overshot on the outbreak of the global financial crisis.
Yoon said at his confirmation hearing that the government would conservatively manage foreign exchange reserves, currently amounting to $200 billion, in contrast to Kang, who said that no developed country leaves exchange rates in the hands of the market.
The country's foreign exchange reserves stood at $201.7 billion as of January, slightly more than its $193.9 billion short-term foreign debt. Hence, without much ammunition, the government is likely to try to maximize the effects of intervention without wasting dollars, getting through a minefield of risks that include North Korea's missile threat and the possible default of Eastern European countries.