The government is set to conduct inspections of speculative trading and market disruption in the foreign exchange market following a recent surge in the won-dollar exchange rate.
On June 9, the Ministry of Economy and Finance held a meeting with market experts from the Bank of Korea and the foreign exchange, securities, and macroeconomic sectors to discuss recent trends in the foreign exchange market and potential responses.
During the meeting, participants noted that the fundamentals of the South Korean economy remain strong, citing the upward revision of the first-quarter GDP estimate, a sustained current account surplus, and the activation of the National Pension Service's new framework. They expressed the view that the recent concentration in the foreign exchange market is temporary and that volatility is expected to ease in the future.
The discussion also covered the status of non-deliverable forward (NDF) transactions and strategies to absorb NDF demand into the domestic foreign exchange market. Director Moon Ji-sung emphasized the need to attract foreign investors' NDF demand to the domestic market through 24-hour foreign exchange market operations and an offshore won payment system, thereby enhancing the competitiveness and efficiency of the domestic foreign exchange market.
The government has expressed serious concern about the current market situation and reaffirmed its commitment to respond sternly to speculative trading that undermines market order or encourages one-sided movements in the exchange rate.
As part of this effort, the government has begun preparations for inspections to determine whether speculative trading and market disruption are occurring in the foreign exchange market. Relevant agencies are set to conduct on-site inspections and examinations this week.
The inspections will focus on transactions aimed at disrupting market functions or hindering the price discovery process, as well as large-scale one-sided trades executed at specific times to disadvantage customers. The government plans to closely monitor major trading flows in collaboration with relevant agencies, including the Bank of Korea.
Director Moon stated, "It is crucial for market participants to play a responsible role in ensuring the stable operation of the foreign exchange market and establishing a sound trading order," and urged each institution to strengthen internal controls and risk management to prevent speculative trading or actions that could disrupt market order.
* This article has been translated by AI.
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