If necessary, the government will inject foreign exchange liquidity into the spot exchange market. We'll prevent the won from further plummeting despite a short supply of dollars," said Minister of Strategy and Finance Kang Man-soo on Sept. 30.
The minister made the remarks when he met with reporters after attending a snap meeting, which was chaired by Prime Minister Han Seung-soo to review the financial market in the wake of the latest rejection by the U.S. House of Representatives of an emergency rescue bill worth $700 billion.
The minister pledged to ban the short selling of stocks and inject as much foreign exchange liquidity as necessary into the market to stabilize it. He also hinted at ways to supply liquidity amounting to US$10 billion to the swap market through the "Exchange Stabilization Fund."
The minister, meanwhile, warned against jittery responses, saying, "Under these circumstances, the foreign exchange market players don't need to be too restless. They don't need to worry about the liquidity either, considering that the government has sufficient foreign exchange reserves. If we deem it inevitable, we'll inject it into the market."
He expressed optimism, saying many experts predict that the current account will be in balance, if the oil prices stabilize, and that the U.S. Congress will eventually approve the bailout program after bipartisan negotiations.
Turning to worries about a recurrence of a financial crisis in the country, the minister dismissed such concerns by saying, "The corporate debt-to-equity ratio was more than 400 percent during the financial crisis in the late 1990s, but the ratio is less than 100 percent now. At that time, the government's foreign exchange holdings were worth less than three months of accounts payable, but the current reserves are worth more than six months."
The financial fundamentals in Korea and the United States are also different, considering that the business property mortgage rate in Korea is a mere 49 percent, but that in the United States it is close to 90 percent. Under these circumstances, the foreign exchange market has shown an overly sensitive response to the U.S. financial turmoil, the minister pointed out.
The minister promised that the government will surely give support to the foreign exchange market as far as the liquidity shortage is concerned, while counseling prudence in this situation.
In conclusion, the minister was upbeat on financial prospects. He said if the balance of current accounts improves, everything will turn for the better one by one, and added that the only way for the national economy to recover will be to make sure that the current account balance improves.
The minister made the remarks when he met with reporters after attending a snap meeting, which was chaired by Prime Minister Han Seung-soo to review the financial market in the wake of the latest rejection by the U.S. House of Representatives of an emergency rescue bill worth $700 billion.
The minister pledged to ban the short selling of stocks and inject as much foreign exchange liquidity as necessary into the market to stabilize it. He also hinted at ways to supply liquidity amounting to US$10 billion to the swap market through the "Exchange Stabilization Fund."
The minister, meanwhile, warned against jittery responses, saying, "Under these circumstances, the foreign exchange market players don't need to be too restless. They don't need to worry about the liquidity either, considering that the government has sufficient foreign exchange reserves. If we deem it inevitable, we'll inject it into the market."
He expressed optimism, saying many experts predict that the current account will be in balance, if the oil prices stabilize, and that the U.S. Congress will eventually approve the bailout program after bipartisan negotiations.
Turning to worries about a recurrence of a financial crisis in the country, the minister dismissed such concerns by saying, "The corporate debt-to-equity ratio was more than 400 percent during the financial crisis in the late 1990s, but the ratio is less than 100 percent now. At that time, the government's foreign exchange holdings were worth less than three months of accounts payable, but the current reserves are worth more than six months."
The financial fundamentals in Korea and the United States are also different, considering that the business property mortgage rate in Korea is a mere 49 percent, but that in the United States it is close to 90 percent. Under these circumstances, the foreign exchange market has shown an overly sensitive response to the U.S. financial turmoil, the minister pointed out.
The minister promised that the government will surely give support to the foreign exchange market as far as the liquidity shortage is concerned, while counseling prudence in this situation.
In conclusion, the minister was upbeat on financial prospects. He said if the balance of current accounts improves, everything will turn for the better one by one, and added that the only way for the national economy to recover will be to make sure that the current account balance improves.
No comments:
Post a Comment