Seoul, Tokyo ready to respond to excessive FX volatility

South Korea and Japan expressed serious concern about the recent depreciation of their currencies, and stood ready to take action against excessive exchange-rate volatility, South Korea’s Finance Ministry said in a statement released yesterday.

In a meeting on Tuesday in Washington, South Korean Finance Minister Choi Sang-mok and his Japanese counterpart Shunichi Suzuki expressed their intention to take appropriate action against excessive movement, the ministry said in a statement.

Receding expectation of near-term US interest rate cuts has pushed up the American dollar against many currencies including the won and yen.

The Japanese government’s top spokesman

Yoshimasa Hayashi declined to comment on specifics of currency policies, stressing rapid currency moves are undesirable and that it is important for exchange rates to move stably reflecting fundamentals.

“The government will closely watch foreign exchange moves and take all possible measures,” Hayashi told reporters in a press conference.

The Japanese currency stood at ¥154.60 to the dollar in Asia yesterday, having hit a 34-year low on Tuesday.

Korea’s currency was at 1,386.8 won per dollar, edging away from a 17-month low of 1,400 hit on Tuesday.

The finance leaders of South Korea, Japan and the United States are scheduled to hold their first trilateral meeting in Washington this week, on the sidelines of the International Monetary Fund and Group of 20 gatherings.

Markets are on alert for the chance of yen-buying currency intervention by Japanese authorities, though analysts are divided on the likelihood of action as the dollar creeps near the psychologically important ¥155 level.

“There could be intervention if the dollar exceeds ¥155 but the impact would be short-lived and limited,” said Toru Suehiro, chief economist at Daiwa Securities.

Separately, Bank of Korea Governor Rhee Chang-yong said in an interview with CNBC in Washington that the central bank was ready to deploy measures to calm the market as the recent currency movements had been a little excessive. – Reuters