“I will also block the purchase of dollars by the National Pension Service”… The government focuses on stabilizing the exchange rate

Implementation of foreign exchange between the foreign exchange authorities and the National Pension Service
Stabilize the exchange rate by easing the demand for pensions for the dollar
However, due to a decrease in foreign exchange reserves, the government’s live ammunition has decreased.
Government “Temporary reduction in payments due to their return on maturity”

▲ The KOSPI closes by giving away 2300, and the gain-dollar exchange rate continues to strengthen in the dollar.
On the afternoon of the 23rd, in the Hana Bank dealing room in Jung-gu, Seoul, the exchange rate between the KOSPI and the US dollar is displayed.
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The government appears to be increasing the intensity of market intervention in terms of supply and demand for dollars in order to capture the recent surge in the gain-dollar exchange rate. The plan is to stabilize the dollar-earned exchange rate by reducing the demand for dollars in the market by selling dollars into the market on a large scale, and by having the National Pension Service buy dollars from the foreign exchange reserves of the exchange authorities foreign. rather than the foreign exchange market when making foreign investments.

The foreign exchange authorities and the National Pension Service agreed on the 23rd to conduct foreign exchange transactions within the limit of $10 billion by the end of this year. The maturity of all swap transactions is 6 or 12 months. For example, if the foreign exchange authority and the National Pension Service execute a $100 million swap transaction with a maturity of 6 months, the foreign exchange authority pays the National Pension $100 million, and the National Pension is transfer the money earned to the foreign exchange authority using the standard trading rate on the day of the transaction The Ministry of Strategy and Finance explained that since the National Pension Service will not buy dollars from the market, the demand for exchange will on the spot is relieved by the National Pension Service, which is expected to contribute to stabilizing supply and demand in the foreign exchange. market, explained the Ministry of Strategy and Finance.

Previously, the government tried to stabilize the market through verbal interventions and dollar sales, but as the won-dollar exchange rate continued to soar above 1,400 won, it is believed to have even set up a foreign currency exchange between the exchange authorities overseas and the National Pension Service. On the 15th and 16th, the foreign exchange authorities kept the exchange rate of 1,400 won between the dollar won by verbally intervening and selling US$1 billion. However, on the 21st (local time), the United States Federal Reserve (Fed) raised the key interest rate by 0.75 percentage points and strengthened the strong dollar. This is the highest in 13 years and 6 months since the 20th. In response, Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho held an emergency macroeconomic and financial meeting on the same day and said, “As for the flow of the exchange rate between the won and the dollar, we will precise control. factors affecting price variables behind the level of the exchange rate.” It was announced that foreign currency exchange would be carried out between the national pensions. On the 23rd, the exchange rate closed at 1409.3 won per dollar, down 0.4 won from the previous trading day’s closing price.

The foreign exchange between the foreign exchange authority and the national pension can reduce the demand for dollars in the market, but there is a problem that foreign exchange reserves are reduced as the dollar is paid into the national pension in instead of that. If foreign exchange reserves fall, not only will there be less ammunition for the government to intervene in the foreign exchange market, but it will also lower Korea’s external credibility, which will lead to an outflow of dollars and rise the exchange rate further. Korea’s foreign exchange reserves were 438.6 billion dollars by the end of July, ranking ninth in the world, and that is not a cause for concern. However, as Korea’s foreign exchange reserves fell by $27 billion this year, it showed a sharp decline, suggesting that Korea’s ability to protect the foreign exchange market may be undermined, Bloomberg News reported on the 13th.

Regarding this, the Ministry of Strategy and Finance explained, “Through foreign exchange exchange transactions between the foreign exchange authorities and the National Pension Service, the amount of foreign exchange reserves is reduced during the contract period, but only temporarily the reduction in foreign exchange reserves. for it is returned in full at maturity.”

Reporter Park Sejong Ki-seok

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