The South Korean won has continued its downward trend, surpassing the 1480 mark against the U.S. dollar, prompting the Financial Supervisory Service (FSS) to step in and provide full support for export companies. The FSS has encouraged financial institutions to extend the maturities of foreign currency loans and import letters of credit to alleviate pressure on businesses.
On the morning of the 27th, a financial review meeting was held by the FSS, led by Senior Deputy Governor Lee Se-hoon. The meeting assessed the sharp rise in the exchange rate and its potential impacts on year-end money market conditions. Despite recent volatility in the foreign exchange market, the FSS concluded that the overall financial sector and corporate funding situation remained stable. The meeting also highlighted the favorable conditions for corporate bond issuance, with no significant movements observed in retirement pensions, where maturities typically peak at the end of the year.
Volatility in the Foreign Exchange Market
The won-dollar exchange rate crossed the 1480 won mark around 11 a.m. on the 27th, marking the first time this threshold had been breached during the day since November 27, 2008, amidst the global financial crisis. This surge in the exchange rate reflects growing market instability, prompting concerns among businesses, particularly exporters.
In response to the potential risks posed by these rising exchange rates, the FSS has pledged to engage with the financial sector and businesses to identify any challenges and provide targeted support. Banks have been urged to take measures to help mitigate the impact on exporters, including extending the maturities of foreign currency loans, import letters of credit, and offering preferential discount rates for trade bills.
Financial Authorities Act to Stabilize the Market
Senior Deputy Governor Lee Se-hoon emphasized that the FSS would take active steps to support the stabilization of foreign exchange supply and demand. This includes measures such as raising the limits on forward exchange positions for financial companies, easing restrictions on the use of foreign currency loans, and implementing ongoing improvements in foreign exchange supervision to alleviate the burden on export companies.
The FSS also outlined plans to ensure that regulatory measures align with the broader goal of supporting the real economy. These include rationalizing risk weights for banks, deferring stress buffer capital requirements, and transitioning insurers to the new solvency (K-ICS) system. Additionally, the authorities plan to provide swift support for small business owners, facilitating debt adjustments, business closures, and mutual growth financing initiatives.
Looking Ahead: Focus on Exporters and Small Businesses
The FSS’s proactive measures reflect a broader commitment to ensuring stability in the foreign exchange market while supporting export companies and the real economy. With growing concerns over the rising won-dollar exchange rate, these steps aim to mitigate the impact on South Korea’s trade-dependent economy and ensure a smooth year-end financial transition.
As financial authorities continue to monitor market conditions, exporters, small business owners, and other stakeholders can expect ongoing support to navigate the challenges posed by the volatile currency market.
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