South Korea Says It Has Ample Capacity to Tackle FX Volatility, Vows Swift Action on Excessive Moves

South Korea's Ministry of Economy and Finance said it has ample capacity to respond to the recent increase in foreign-exchange market volatility.

Second Vice Finance Minister Huh Jang made the remarks at the second meeting of the International Financial Policy Advisory Committee on July 1, according to Yonhap News and other local media on July 2. The committee is a private advisory panel under the deputy prime minister made up of experts in international finance and foreign-exchange policy.

Huh said volatility in the won-dollar exchange rate has increased as the likelihood of additional Federal Reserve rate hikes has risen and foreign investors have continued to be net sellers of South Korean stocks. Foreign-exchange authorities have sufficient room to respond and are ready to take necessary market-stabilization steps immediately if the exchange rate diverges from fundamentals and one-way moves intensify.

The ministry will also unveil a roadmap for the internationalization of the won later this month. Huh said the government will move in stages to allow foreigners to use the won freely in offshore markets. It also plans to improve won trading and settlement infrastructure to support easier funding and use of the currency offshore.