Gov’t to Regularly Disclose FX Intervention Records open the window of AOD

Write : 2018-05-20


The government has unveiled plans on disclosing records of its currency market intervention as part of efforts to increase transparency of the foreign exchange market.
The Finance Ministry announced Thursday that it decided to reveal those intervention records every six months for one year and then switch to quarterly disclosures to minimize any negative impact on the market.
The ministry said the disclosures will be made within three months after a reporting period, and the net amount of FX trading by the country's currency authorities will be disclosed. FX trading here refers to the U.S. dollar.
The first disclosure will be posted on the Bank of Korea's Web site next March, revealing records for the period from July to December this year.
South Korea has been engaged in "smoothing operations" in the foreign exchange market to check extreme one-sided movements, but the U.S. and the International Monetary Fund have been demanding that it disclose such interventions to enhance transparency.
The government said the latest decision aims to defuse unnecessary misunderstandings and address concerns over the lack of transparency.
The decision was based on a joint declaration urging transparency in FX policies adopted in 2015 by 12 signatories of the Trans-Pacific Partnership(TPP) agreement including the U.S., Japan, Singapore and Australia.
South Korea has been the only country in the OECD that did not disclose FX market intervention records and the pressure to do so has been growing.
Instead of designating Korea as a currency manipulator, the U.S. Treasury this year called on Seoul to reveal the records.
Seoul faced an inevitable situation where it could no longer ignore calls from the global community.
The government believes it will be better to disclose the records to remove the possibility of misunderstandings as the country does not engage in artificial currency manipulation.
It also believes the disclosure will mature the market and boost Korea’s credibility. The country’s foreign exchange market has grown over 20 fold in the past 20 years.
The South Korean won has become one of the more actively traded emerging market currencies, more so than the Turkish lira, the Russian ruble and the Indian rupee.
Finance Minister Kim Dong-yeon said that foreign exchange rates should be determined in the market but that the government maintains the stance that market stabilization measures will be taken in the presence of abrupt one-sided movements.
However with the disclosure, the government’s intervening moves are not expected to be as evident as in the past.

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