Finance ministry says Korea-US trade deal fact sheet eases FX concerns but risks remain

President Lee Jae Myung, right, shakes hands with U.S. President Donald Trump in Gyeongju, North Gyeongsang Province, ahead of a special banquet, Oct. 29. Yonhap

The finance ministry said Friday that a joint fact sheet released by Korea and the United States detailing their trade deal has helped ease concerns over foreign exchange (FX) market stability, though uncertainties still remain.

Seoul and Washington released the fact sheet outlining Korea's pledged $350 billion investment and related security agreements, including provisions addressing the potential impact of a bilateral memorandum of understanding (MOU) on Seoul's FX market.

"The ROK will use its best efforts, to the greatest extent possible, to source the U.S. dollars through means other than market purchases so as to minimize any potential impact on the market," the document said, referring to Korea by the acronym of its official name.

A senior finance ministry official said the fact sheet shows that FX market stability was the most important issue in the negotiations, and stressed that the U.S. "fully understood" Korea's position.

The official added that the government does not expect any market disruptions during the implementation of the investment commitments.

"Should it appear that the fulfillment of the commitments in the MOU may cause market instability, such as disorderly movements of Korean won, the ROK may request an adjustment in the amount and timing of the funding, and the United States will, in good faith, give due consideration to such request," the sheet said.

"There is significant meaning in the fact that the U.S. accepted a mechanism allowing adjustments to the amount and timing of funding," the official said.

Reflecting Seoul's concerns about the impact of its pledged investment on the foreign exchange market, the two sides agreed that Korea will not be required to fund an aggregate amount of U.S. dollars greater than $20 billion in any calendar year, the document underlined.

The official noted that some observers could mistakenly believe that $20 billion would leave the country every year, while stressing that the amount cited in the MOU represents a maximum ceiling, not a fixed annual obligation.

The local currency was quoted at 1,457 won against the greenback at 3:30 p.m., up 10.7 won from the previous session, rebounding from levels near its lowest level in 16 years, following the sheet's announcement, and Seoul authorities' pledged to devise measures to stabilize the FX market.