World Business News Tuesday

S Korea pledges strong steps
to stabilise won
Agence France-Presse . Seoul

South Korea’s central bank and finance ministry warned Monday they will take ‘strong measures’ to stabilise the foreign exchange rate of the won.
The nation’s currency has fallen more than 10 per cent against the dollar so far this year, making imports more expensive and putting upward pressure on inflation.
‘We will take a close look at supply and demand and foreign exchange movements in the local currency market, and if the imbalance is deemed too excessive, we will take strong necessary measures,’ the ministry and the Bank of Korea said in a joint statement.
South Korea, Asia’s fourth largest economy, imports virtually all its oil needs and has been hit especially hard by soaring crude prices. Annual inflation rose to 5.5 per cent in June, close to a 10-year high.
On Sunday the government announced a series of energy-saving measures, including banning official vehicles from the road every other day.
Choi Jong-Ku, head of the ministry’s international finance bureau, acknowledged the government has used foreign exchange reserves to stabilise the won.
‘We will continue to use our reserves if necessary,’ he said.
The reserves, the world’s sixth largest, shrank to 258.1 billion dollars at the end of June from 262.2 billion dollars at the end of last year.
‘The most important thing at this moment is price stability,’ Choi said, dismissing concern the reserves would be excessively depleted.
Ahn Byung-Chan, a central bank director-general, said the portion of foreign exchange reserves invested overseas could be ‘easily liquidated’ if necessary.
Analysts say government intervention may not dampen the strong appetite for the dollar.
‘Our government is also trying to curb inflation but there isn’t much for them to do given an external factor like oil prices,’ SK Securities analyst Won Jong-Hyucke said.
He said foreign investors were unloading investments in emerging markets, betting growing inflation risks will further hurt sentiment.
Foreign exchange authorities have sold a sizeable quantity of dollars to prop up the won in recent weeks but the impact has been short-lived.
The won rose to 1,036.50 against the dollar in early trade Monday but finished at 1,042.90 won.