Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
EXCLUSIVE Seoul to tap FX reserves to ease dollar shortage
Dealers at Hana Bank watch monitors in a dealing room at its office in Seoul, Tuesday. The benchmark KOPSI closed at 1,672.44, down 2.47 percent from the previous trading day. The won-dollar exchange rate also surged to close at 1,243.5 won per U.S. dollar, up 17.5 won from a day earlier. Yonhap
By Lee Min-hyung
By Lee Min-hyung
The government plans to expand dollar liquidity by supplying its foreign exchange reserves into the currency swap funding market in a bid to ease concerns over a dollar shortage here, according to the financial authorities Tuesday.
The move is one of the administration's comprehensive market stabilization measures scheduled to be unveiled at 9:00 a.m. Wednesday.
“The Bank of Korea (BOK) and the finance ministry have been in talks to introduce a set of measures, as analysts have noted that local businesses and financial firms are having difficulty in securing dollars (on the swap market),” an official from the financial authorities said on condition of anonymity.
“We are considering lending part of our foreign exchange reserves to financial firms, including banks and brokerages, to ease dollar shortages,” he added.
The move comes as the cost of raising dollars through won-dollar swaps soared to a six-year high due to surging demand for the U.S. greenback among securities firms here amid a massive sell-off of local stocks by foreign investors.
Foreign investors have been on a mass selling spree of Korean stocks for nine consecutive trading days as of Tuesday.
On top of that, the financial authorities are also considering using other approaches employed during the 2008 global financial crisis, according to the official.
During the 2008 global financial crisis, the BOK and the financial authorities took a series of steps to stabilize the volatile foreign exchange market, including a currency swap deal between the BOK and the United States Federal Reserve in October that year.
The BOK and the finance ministry declined to confirm details over the package of measures.
BOK Governor Lee Ju-yeol said Monday that the central bank had a clear understanding of the need to sign a Korea-U.S. currency swap deal, after holding an emergency monetary board meeting.
But he declined to confirm specifics over whether the central had any plans to do so in the foreseeable future amid concern that his remark could create market confusion.