Excluded from Korea's Exchange Rate Watchlist... "Government's Foreign Exchange Policy Operation Becomes Easier"

US Treasury Department Releases 'Currency Report'... South Korea Excluded

The government assessed that the exclusion from the list of currency monitoring countries is due to changes in macroeconomic indicators such as the current account balance, and thus the direct impact on the Korean economy will not be significant. However, as recent external volatility has increased, leading to wider exchange rate fluctuations, it is expected that the government's foreign exchange policy management will become easier.

The Ministry of Economy and Finance explained that the impact on Korea is minimal. A ministry official stated, “Even when Korea was on the currency monitoring list, the United States did not exert significant pressure on Korea’s exchange rate policy,” adding, “Therefore, even after being removed from the currency monitoring list, the impact on Korea will not be substantial.”

However, since the risk of being designated as a currency manipulator has significantly diminished, there is also an evaluation that the government’s capacity to operate foreign exchange policies has increased. An Seong-bae, Director of the International Macroeconomics and Finance Division at the Korea Institute for International Economic Policy (KIEP), said, “Being on the monitoring list means being under observation, so there was no pressure from the U.S. on Korea, but it is meaningful that Korea is now further away from the risk of being labeled a currency manipulator,” adding, “This is largely due to the reduction in the current account surplus, but it can also be interpreted as a result of the government’s continuous efforts to enhance transparency in the foreign exchange market.”

Director An further stated, “The risk during periods of rapid exchange rate fluctuations has been somewhat alleviated,” and “The government has secured the capacity to implement foreign exchange policies in response to sudden exchange rate changes.” He added, “Since the report is submitted to the U.S. Congress, there is a risk of facing negotiation pressure if a negative perception regarding exchange rates is conveyed to Congress, but Korea has moved away from that risk.”

[Image source=Yonhap News]

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