Forex Blog: Currency Trading News & Analysis.

April 6th 2005

Paranoia in South Korea

South Korean officials are becoming more vocal in their criticism of speculators. A bubble may be forming in South Korea’s real estate market, and many believe the Won is overvalued. They are quick to point fingers at foreign hedge funds for driving the Won to record levels. South Korea has pursued an economic policy of export promotion for several decades now. They believe this policy, and the concomitant low exchange rate, are vital to economic growth. Accordingly, the Central Bank has gone to great lengths to try to keep the exchange rate competitive, including buying over $200 Billion in American treasuries and issuing $7 Trillion Won worth of stabilization bonds in the last year alone. Perhaps the time has come for South Koreans to abandon their "anti-market hysteria" and learn to accept prices which are determined by free markets. The South Korea Times reports:

It is time to abandon the costly illusions of mercantilist logic and export-led growth policies that were defeated intellectually in 1776 with the practical limits made clear in 1997. As such, exchange rates should be determined by supply-and-demand conditions and economic fundamentals that do not introduce price distortions into the economy.

Read More: Anti-market Hysteria

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Posted by Adam Kritzer | in Central Banks | No Comments »

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