Exchange Rates and Interest Rates Fluctuate... Government Says "Domestic Market Reaction Somewhat Excessive" (Comprehensive)

Lee Eokwon, Deputy Minister of Economy and Finance, "24-Hour Monitoring System Activated"

On the 7th, when the KOSPI index started higher, dealers were working in the Hana Bank dealing room in Euljiro, Seoul. On that day, the KOSPI opened at 2,936.87, up 28.56 points (0.98%) from the previous trading day, and continued to widen its gains. Photo by Moon Honam munonam@

[Asia Economy Reporters Kim Hyunjung (Sejong), Jang Sehee] Amid worsening global investment sentiment leading to increased volatility in exchange rates and interest rates, the government has assessed that the domestic financial and foreign exchange market reactions are somewhat excessive. However, with major external events scheduled this month, including the release of U.S. employment and inflation data and the upcoming interest payment date on China Evergrande Group's dollar bonds, the government plans to operate a 24-hour monitoring system to stabilize the market.

On the morning of the 7th, Lee Eokwon, First Vice Minister of Strategy and Finance, held a macroeconomic and financial review meeting and made these remarks. Vice Minister Lee diagnosed, "As inflation concerns persist due to the Federal Reserve's tapering and shifts in major countries' monetary policies, as well as global supply chain disruptions, major external risk factors such as the China Evergrande Group crisis and uncertainties related to the U.S. debt ceiling negotiations are acting in combination to worsen global investment sentiment, thereby increasing volatility in domestic and international financial markets." Prior to this, on the previous day, overlapping external negative factors caused the KOSPI to plunge to the low 2900s, and the won-dollar exchange rate surged, approaching the 1200 won level. As of 10:20 a.m. on the same day, volatility has somewhat eased, with the KOSPI at around 2930 and the exchange rate at the 1190 won level.

Regarding this, Vice Minister Lee emphasized, "While it cannot be ruled out that volatility in domestic and international financial markets may increase as external risk factors unfold, considering the fundamental conditions of our market, there is a tendency to show a somewhat excessive reaction compared to other countries." Indeed, the U.S. is scheduled to release employment data (on the 8th) and inflation data (on the 13th) this month, and the Evergrande Group's dollar bond interest payment date (on the 11th) and the U.S. Treasury Secretary's warning of federal government fund depletion (on the 18th) are also approaching this month. The Federal Open Market Committee (FOMC) meeting is scheduled for the 4th of next month.

He continued, "It is necessary to calmly observe the market situation while comprehensively and objectively considering evaluations of our economy from overseas." He added, "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 all available measures to promptly implement necessary market stabilization actions." Furthermore, he stated, "Especially regarding the government bond market, considering the recent sharp rise in interest rates, we will 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.