Vice Minister Ki Jae: "Operating 24-hour Financial and Foreign Exchange Monitoring System... Domestic Reactions Somewhat Excessive"

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] Amid the worsening global investment sentiment and increased volatility in financial markets, the government has assessed that the market reactions, such as the domestic stock price decline and the rise in exchange rates and interest rates, are somewhat excessive. Furthermore, to stabilize the financial and foreign exchange markets going forward, a 24-hour monitoring system will be operated, and available measures to be implemented if necessary will be reviewed.

On the morning of the 7th, Lee Eokwon, First Vice Minister of the Ministry of Economy and Finance, held a macroeconomic and financial review meeting involving departments related to macroeconomic finance within the ministry and the International Finance Center. He stated, "As volatility in the global financial markets has increased recently, the domestic financial market has also been affected, with stock prices falling and the exchange rate (KRW-USD) and interest rates rising." The day before, amid overlapping external negative factors, the KOSPI plunged to the low 2900s, and the KRW-USD exchange rate surged, approaching the 1200 won level.

Regarding the background of the increased volatility in domestic and international financial markets, the Vice Minister explained, "The main causes are evaluated to be the combined effects of major external risk factors worsening global investment sentiment, including the U.S. Federal Reserve's tapering and shifts in major countries' monetary policy stances, ongoing inflation concerns due to global supply chain disruptions, the China Evergrande Group crisis, and uncertainties related to the U.S. debt ceiling negotiations." He also noted, "However, overnight (on the 6th), the U.S. stock market rose and government bond yields fell due to eased uncertainties related to the U.S. debt ceiling."

He emphasized, "While it cannot be ruled out that volatility in domestic and international financial markets may increase as these external risk factors unfold, considering the fundamental conditions of our market, there is a somewhat excessive reaction compared to other countries. Therefore, it is necessary to calmly observe the market situation while comprehensively and objectively considering evaluations of our economy from overseas."

Considering that the U.S. employment data (on the 8th) and inflation data (on the 13th) are upcoming, along with the Evergrande Group’s dollar bond interest payment date (on the 11th) and the U.S. Treasury Secretary’s warning deadline for federal government fund depletion (on the 18th), he explained, "Since major external risk events are expected to continue unfolding, we plan to operate a 24-hour monitoring system to stabilize the financial and foreign exchange markets and thoroughly review and prepare available measures to promptly implement market stabilization actions if necessary."

He added, "In particular, regarding the government bond market, considering the recent steep rise in interest rates, we have decided to actively respond by flexibly adjusting issuance volumes by maturity according to supply and demand conditions."

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