Foreign Exchange Authorities' Net Sale of $5.85 Billion in Q1... Defending Against COVID-19-Induced Exchange Rate Surge

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] The foreign exchange authorities announced on the 30th that they had net sold $5.851 billion in the first quarter of this year to stabilize the market amid the spread of the novel coronavirus infection (COVID-19).

The Bank of Korea and the Ministry of Strategy and Finance disclosed the details of the market stabilization measures for the first quarter on their websites and made this announcement. The foreign exchange authorities have been disclosing foreign exchange market intervention details since March last year (targeting the second half of 2018). Since the end of last year (targeting the third quarter of 2019), they have announced market stabilization measures on a quarterly basis.

As COVID-19 spread, dollar demand surged worldwide, causing the won-dollar exchange rate to soar. It appears that the authorities focused on easing the excessive rise in the exchange rate (won depreciation) by releasing dollars.

Compared to the net sale of $3.8 billion in the first half of last year and $2.87 billion in the third quarter, it can be seen that more than twice the amount was released on a quarterly basis. It was found that there was no special purchase or sale of dollars in the fourth quarter of last year.

The foreign exchange authorities allow the exchange rate to be determined by the market but take market stabilization measures using foreign exchange reserves (including the Foreign Exchange Equalization Fund) in case of sharp rises or falls. The measures are carried out in both selling and buying directions.

This content was produced with the assistance of AI translation services.