By Kim Yon-se
Staff Reporter



Currency traders are busy in monitoring the fast-changing won-dollar exchange rate Monday at a commercial bank in the Incheon International Airport. / Korea Times


Korea’s two top economic policymakers on Monday showed their strong determination to stabilize the currency movement through an unpublicized meeting.

The meeting of Deputy Prime Minister and Finance-Economy Minister Lee Hun-jai and Bank of Korea (BOK) Governor Park Seung has been partially successful in containing what is called the Greenspan effect of a weak dollar trend.

The won-dollar rate on Monday closed at 1,065.3 won, down 3.4 won from 1,068.7 won in Friday’s trading. The won’s gain was less than has been anticipated before the opening of the Seoul currency market.

Many currency dealers said Korea’s central bank will likely buy dollars aggressively as the won-dollar exchange rate is approaching the 1,000 mark.

They made the prediction after the Lee-Park meeting at the Westin Chosun Hotel in Seoul yesterday.

Minister Lee allegedly asked Governor Park to be ``active and bold’’ in stabilizing the currency market, which analysts interpret as the government’s strong intention to curb or slow the won’s step appreciation.

No official statement came out following the meeting but the Ministry of Finance and Economy (MOFE) and the BOK confirmed the meeting in a symbolic gesture to maximize the effect of the Lee-Park meeting on their strong determination to stabilize the currency rate.

Many analysts predicted the central bank has already been intervening in the market. ``It seems that the MOFE is suffering from a scarcity in its reserves for the foreign exchange rate stabilization,’’ a dealer said.

He alleged that Minister Lee asked Governor Park to prevent the won from gaining further against the greenback by aggressively buying dollars by issuing banknotes as much as possible.

But an MOFE director general said, ``The minister denied the allegations over the request for the issuance of banknotes.’’ A BOK official in charge of oversight of the foreign currency market also declined to comment on the meeting between the policymakers.

The MOFE official said stabilizing the won-dollar exchange through the issuance of banknotes would be a last resort and raised the possibility of inflationary pressures. ``That means the currency stabilization reserves held by the government and the central bank were completely drained out. The allegations are totally nonsense.’’

He added that it would be a silly policy if the MOFE and the BOK disclose the measures against the falling won-dollar rate.

``The meeting (between Lee and Park) would just give a signal to the market that foreign exchange authorities could intervene in the market if necessary,’’ he said.

If we disclose when we will buy or sell dollars, we will always lose the currency game, he said. ``I repeat the foreign currency policy is the same as poker games.’’

Another MOFE official hinted that the government is ready to wage a currency war with a variety of undisclosed fatal weapons.

While MOFE and BOK officials are holding their tongues, market watchers say the Lee-Park meeting was inevitable as there was no special action from G20 finance ministers and central bank governors meeting in Berlin against the dollar’s sharp depreciation versus major currencies worldwide.

Though several nations, such as Germany and Japan, betrayed their dissatisfaction toward the U.S. Federal Reserve Board’s weak dollar policy (contrary to the Bush administration’s commitment to a strong dollar), a majority of the participants of the G20 meeting has opposed central banks’ active intervention in the currency market.

kys@koreatimes.co.kr