On Sept. 26, the won-dollar exchange rate climbed to the 1,410-won level during intraday trading for the first time in four months, as displayed at a currency exchange booth in Seoul’s Myeong-dong district. (Yonhap)
SEOUL, Oct. 1 (Korea Bizwire) – South Korea and the United States have reaffirmed a fundamental principle to avoid manipulating exchange rates and to monitor the “stability” of the foreign exchange (FX) market, Seoul’s finance ministry said Wednesday.
The two countries have agreed to “avoid manipulating exchange rates or the international monetary system to prevent effective balance of payments adjustment or to gain an unfair competitive advantage,” the agreement released by the Ministry of Economy and Finance said.
The agreement was reached during the latest series of talks between two countries’ financial authorities, separate from ongoing trade negotiations amid speculation about a currency swap arrangement with the U.S. as a safeguard for South Korea’s US$350 billion investment pledge.
“Both countries commit to exchanging any foreign intervention operations on a monthly basis as part of their continued efforts to enhance communication and monitor foreign exchange market developments and stability,” the released document said. The countries previously exchanged such information on a quarterly basis.
The ministry said the latest agreement is significant in that it reaffirms the importance of close communication and mutual trust between the two countries’ financial authorities in ensuring foreign exchange market stability.
Similar agreements recently reached by the U.S. with other major trading partners, such as Japan and Switzerland, did not contain references regarding the stability of the FX market.
An employee organizes dollars at the counterfeit countermeasures center at Hana Bank’s headquarters in central Seoul. (Yonhap)
Seoul and Washington agreed that “any macroprudential or capital flow measures will not target exchange rates for competitive purposes,” according to the finance ministry.
They also agreed government investment vehicles will invest abroad only for risk-adjusted return and diversification purposes, “and not to target the exchange rate for competitive purposes,” it added.
The ministry said the agreement does not contain references to the foreign exchange swap of the National Pension Service (NPS) as mentioned in a Treasury Department report released in June.
The report showed that Washington has kept Seoul on its list of countries to monitor for their foreign exchange policies. Seoul reappeared on the list in November 2024 after being removed in November 2023 for the first time since April 2016.
The report had pointed to South Korea’s use of NPS funds for exchange rate intervention, saying its use of funds for foreign exchange hedging could influence the Korean won’s value.
“Since the agreement sets mutual standards for foreign exchange policy with the U.S., it can be interpreted to mean that as long as these standards are upheld, South Korea is unlikely to be designated a currency manipulator,” said Jung Yeu-jin, a ministry official.
Another Treasury Department report on the watch list is set to be released in November.
(Yonhap)
