S. Korea to consider steps to boost outflows if won rally continues

SEOUL: South Korea will consider measures to boost capital outflows if the won continues to rise sharply, three people familiar with the matter said yesterday, a move that could help the trade-reliant national deal with the economic effects of a surging currency.

While operations to curb the won’s volatility will continue, the nation’s foreign exchange authorities may also look into ways to spur investment abroad should the local currency appreciate on a consistent basis, the people told Reuters.

The government “can consider measures to spur forex outflows,” one of the people said.

A spokesperson for the finance ministry declined to comment on the matter.

Rising domestic interest rates, strong exports and heightened US scrutiny on South Korea’s foreign exchange regime have made it harder for Asia’s fourth largest economy to tame the won’s gains.

Measures that encourage capital out of the country could help policymakers remove some of the upward pressure on the currency without needing to use direct intervention in the foreign exchange market, a sticking point in Seoul’s relations with the Washington.

The US Treasury Department kept South Korea on a ‘monitoring list’ of countries in its report on foreign exchange policies of major trading partners in October last year, along with China, Japan and Germany. — Reuters