South Korea has opened inspections of major banks trading foreign exchange for the first time in 14 years to curb speculation on the won after it weakened to its lowest level in over 16 years.
June 10, 2569 at 08.55:XNUMX a.m. Bloomberg News reported that South Korea has stepped up measures to protect the won after it weakened to its lowest level since the 2552 global financial crisis. Most recently, the Bank of Korea (BOK) and the Financial Supervisory Service (FSS) are preparing to investigate major commercial banks' foreign exchange trading for the first time in 14 years in an effort to curb speculation that could create volatility in the currency.
Both agencies revealed that they will begin both on-site and data-based investigations this Wednesday to determine whether banks or market participants have engaged in trading behavior that may manipulate exchange rates or attempt to push currency values in a direction that benefits themselves or related parties.
These measures reflect the South Korean government's commitment to supporting the won, which has faced significant pressure from foreign investors selling Korean stocks and from tensions in the Middle East that have impacted the global investment climate. As a result, the won fell to its weakest level in over 16 years last week.
While a weaker currency can enhance the competitiveness of the export sector, rapid depreciation could lead to risks of import inflation, capital outflows, and instability in overall financial markets.
Choi Jae-min, an economist from Hyundai Motor Securities. This inspection is seen as a signal that authorities are ready to set red lines for the market, after investors previously perceived a lack of clear restrictions on currency speculation.
He stated that the dollar-to-won exchange rate surpassing 1,500 won reflecting that market psychology is increasingly influencing economic fundamentals, and in such a situation, government agencies are the most important mechanism for curbing negative market expectations.
Analysts also believe the latest measures help reduce the risk of the won weakening to 1,600 won per dollar, which had been a concern for investors in the past.
Following the announcement of the measures, the won strengthened on Wednesday, gaining as much as 0.9% to 1,514.30 won per dollar and rising more than 2% since the beginning of the week. However, the won remains one of the weakest currencies in Asia this year, having fallen 5.3% since the beginning of the year, behind only the Indonesian rupiah and the Indian rupee.
This inspection follows an emergency meeting held by authorities on June 7 and marks a transition from verbal measures and market warnings to direct supervision of commercial banks' foreign exchange trading rooms.
South Korean officials said on Tuesday that they will continue to crack down on speculation in the foreign exchange market and that banks found to violate regulations will face strict legal penalties.
In addition, financial regulators announced stricter monitoring of major banks' foreign currency holdings, temporarily adjusting the frequency of checks from monthly to weekly or even daily to closely monitor volatility in the financial markets.
refer : bloomberg.com
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