Gov't strains to keep won-dollar exchange rate under 1,400

The Korean authorities barely kept the national currency from further weakening to reach the 1,400 level against the dollar. Amid concerns about the high currency exchange rate accelerating the upward trend of inflation, the government presented its repeated outlook that prices will be at a peak in October at the latest.

The won-dollar exchange rate closed at 1,393.7 won on Thursday, up 2.8 from the previous day, in the Seoul foreign exchange market, hitting a new high for two days. In terms of closing price, the figure is the highest in 13 years and six months since the rate marked 1,412.5 won on March 20, 2009.

The authorities allegedly spared no effort to keep the rate under the 1,400 level on the day. On Thursday, the won-dollar rate soared by 17.3 won, reaching the 1,390 mark, and went up to 1397.9 won, hovering slightly below the 1,400 level. The government immediately made a verbal intervention, saying, “The authorities are closely monitoring the trend, staying very vigilant on the possibility of funds rushing within the market.”

It was about an hour after Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho said, “When funds rush into one side and anxiety spreads, the government will seek for necessary measures, including policies to stabilize the market, in a timely manner,” in the National Assembly’s Strategy and Finance Committee. The authorities sent the message as Choo’s statement was insufficient to rein in the rate, which even showed a stiffer increase. The verbal intervention this time was made only 24 days after the last time on Aug. 23, marking already the fifth this year.


Min-Woo Park minwoo@donga.com