The Korean won fell to the "warning line", and South Korea started the battle to defend its local currency! Requiring banks to report foreign exchange positions every hour

time:2022-12-09 20:32:23source:chakarski.com author:Market analysis
The Korean won fell to the "warning line", and South Korea started the battle to defend its local currency! Requiring banks to report foreign exchange positions every hour

South Korean authorities have stepped up monitoring of foreign exchange markets as the won tumbled. South Korea’s foreign exchange authorities have asked banks to report dollar transactions and foreign exchange-related positions every hour to strengthen monitoring of the foreign exchange market, the media reported on Monday, citing people familiar with the matter. The increased reporting frequency of foreign exchange positions is to deter speculative trading and increase the effectiveness of market intervention. Previously, South Korean banks were only required to report three times a day, in the morning, during the lunch break and after the market close. South Korea's foreign exchange authorities also asked banks not to use foreign exchange management for profit. The request was made last Friday. Last week, the won/dollar exchange rate approached the key psychological 1,400 mark, falling to 1,391.10 won per dollar so far, the lowest level since March 2009. According to data from the Korea Exchange, as of August 29, foreign investment accounted for about 72% of short-selling transactions on the KOSPI index in South Korea this year. As the won tumbled last month, the Korea Foreign Exchange Administration issued a verbal warning about speculative trade in the won: The won fell against the dollar amid a stronger dollar, and we will thoroughly check overseas (markets) for speculation Behavior. Since the beginning of this year, the continued strength of the U.S. dollar has hit currencies of other countries like a flood, setting off a bloody storm in the foreign exchange market. Many countries, including South Korea, have paid a heavy price by depleting their foreign exchange reserves to prop up their currencies. In this "domestic currency defense", the Bank of Korea's foreign exchange reserves have shrunk by $27 billion this year. According to data from the Bank of Korea, at the end of August this year, South Korea’s foreign exchange reserves decreased by US$2.18 billion from the previous month to US$436.43 billion. Analysts pointed out that central banks in emerging Asian economies have relied on foreign exchange reserves to protect their currencies from the appreciation of the dollar during the year as the Federal Reserve's aggressive tightening policies stimulated more capital to flow back to the United States. Any sign of a slowdown in currency market intervention could further exacerbate the devaluation of Asian currencies, many of which have recently hit record or multi-year lows. In the VIP article "Preparing for 97? It is also mentioned in South Korea's "Watching" International Speculators" that while South Korea must guard against the risks brought by short-selling, it must continue to consume foreign reserves to support the Korean won. The crisis in 1997 may be staged again in South Korea. In 1997, South Korea was burdened with foreign debts as high as 160 billion US dollars, but at that time South Korea's foreign exchange reserves were less than 30 billion US dollars. At that time, the South Korean won depreciated by more than 50%, and the South Korean stock market plummeted by nearly 70%. Year-to-date, with the weakening of the Korean won, the KOSPI and KOSDAQ indices have fallen by 18.5% and 22.4% respectively. The background of the global energy crisis has even made the situation worse, and a "perfect storm" is approaching South Korea. This article is from Wall Street News, welcome to download the APP to see more
Related content