‘Korea to be on US currency watchlist’
Korea is not likely to be branded as a currency manipulator on the U.S. Department of the Treasury’s foreign exchange report to Congress on Oct. 16.
However, it is expected Korea will remain on the U.S. currency monitoring list due to the country’s trade surplus with the U.S.
This is because Finance Minister Kim Dong-yeon has sufficiently explained to his U.S. counterpart Treasury Secretary Steven Mnuchin that Seoul has not intervened in the currency market to intentionally depreciate the won to boost exports, the finance ministry said Sunday.
The Bank of Korea has maintained that it only sells and buys dollars and won to stabilize the currency market.
Kim met with Mnuchin on the sidelines of the G20 and International Monetary Fund’s financial leaders’ conference in the United States.
There, the finance minister also held meetings with three global credit rating agencies, explaining to them South Korea’s sound economic fundamentals in the face of growing risks of North Korea’s nuclear program and of South Korea’s high household debt.
Kim, who doubles as deputy prime minister, said that Korea’s economy has maintained strong countermeasures that can withstand North Korean threats, and its household debt is “manageable.”
The U.S. Treasury releases its currency report twice a year.
In April this year, Korea was able to avoid being labeled a currency manipulator, but the country remained on the U.S. currency watch list because of Seoul’s “significant trade surplus with the U.S. and the undervalued won.”
The report said that Korea’s undervaluation has backed its large current account surplus.
“The Treasury Department urges Korea to enhance the flexibility of its exchange rate and will be closely monitoring Korea’s currency intervention practices,” the report said.
President Donald Trump has criticized countries including China, Germany and Korea for manipulating their currencies to gain an export edge, calling its free trade deals such as with Seoul a “job killer.”
The U.S. is seemingly taking advantage of its currency classification report as leverage in the renegotiation of the free trade agreement with Korea to get a better deal for the U.S. as part of Trump’s America-first policy.
The U.S. designated Korea a currency manipulator in 1988.
Its bilateral free trade deal with Korea has been in effect since 2012.
Korea’s trade surplus with the U.S. stood at $11.6 billion in 2011, and increased to $23.2 billion last year.