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S. Korea Looks for More Ways to Stabilize Market
Source: koreaherald.com
Source Date: Wednesday, May 19, 2010
Focus: Electronic and Mobile Government
Country: Korea (Republic of)
Created: May 24, 2010

Korea will study additional measures to ensure stability in its foreign exchange market in the event of external shocks like the ongoing European debt crisis and the 2008 collapse of Lehman Brothers, the country’s top financial regulator said Wednesday.

"We will take a thorough look into the country’s foreign currency liquidity situation to see if there is any potential problem and if there is any additional measure that we can take to prevent it,” Chin Dong-soo, chairman of the Financial Services Commission, told a forum in Seoul.

"Local financial markets appear relatively unaffected by Europe’s woes, but authorities will stay vigilant against the possibility that it spark a crisis here like the Lehman Brothers’ collapse did in 2008,” he said.

Authorities here have repeatedly said that the eurozone woes will not have a major impact on Korea, citing the nation’s low level of exposure to the troubled European countries.

However, local financial markets yesterday couldn’t shake off recurring fears that the sovereign debt crisis in some South European countries may slow the global recovery.

The benchmark KOSPI dipped 0.8 percent to 1,640.08 points, while the won closed 1.61 percent lower at 1,165.1 won per dollar.

Korea, having experienced how external shocks can cripple domestic financial markets and the economy in the 1997 Asian financial crisis and the 2008 crisis, will push the issue of a global financial safety net in the upcoming G20 summit, Chin said. Korea is the host nation for the summit.

"Most emerging countries, as well as some advanced ones, agree to the idea, so we hope for progress on this issue in the G20 summit in November,” he said.

Meanwhile, Finance Minister Yoon Jeung-hyun made it clear yesterday that there is no change in the government’s economic stance, as a faster-than-expected rebound of the local economy prompted calls for an early exit from stimulus policies and an interest rate hike.

"Global financial markets are still unstable due to issues such as a sovereign debt crisis in Europe,” he said during a meeting on anti-crisis economic measures.

"We will maintain the current macroeconomic policy stance in order to support the recovery, while working hard to create jobs,” he said.

Calls have been growing that Korea should move toward the exits, after the economy expanded by a faster-than-expected 1.8 percent quarter-to-quarter in the first three months of 2010, boosted by strong exports and reviving domestic demand. Facility investment, consumer sentiment and business confidence all showed improvements.

The unemployment rate fell to 3.7 percent from 3.8 percent in March, declining for a third straight month after reaching a 10-year high of 4.8 percent in January.

The state-run Korea Development Institute think tank on Sunday called for an immediate interest rate hike, saying the Korean economy will likely expand 5.9 percent this year.

The Bank of Korea has left the benchmark interest rate unchanged at a record low of 2 percent since last February.  
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