Forex Blog: Currency Trading News & Analysis.

May 18th 2005

South Korea renounces forex intervention

At $206 billion, South Korea’s foreign exchange reserves are currently the fourth largest in the world. However, this distinction may be short-lived. The Bank of Korea announced today that it will no longer intervene in forex markets, which it had done previously to prevent the Won from appreciating against the USD. This reversal in policy is sensible, as its previous intervention efforts were all in vain. The Won has appreciated 17% against the dollar this year alone. Banking officials indicated that the profitability- or lack thereof- of its reserves is behind the decision. When measured in terms of Won, South Korea’s dollar-denominated forex reserves depreciate in value every day. Some analysts reacted to the news with mixed feelings, fearing that South Korea would begin diversifying its reserves, after foreswearing intervention. The Financial Times reports:

Mr Park said he did not envisage changing the currency mix of the reserves, about two-thirds of which is thought to be in dollar-denominated assets. In February the dollar recorded its biggest drop in five months when a Bank of Korea report said it would diversify its foreign exchange reserves.

Read More: South Korea rules out further currency intervention

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Posted by Adam Kritzer | in Exotic Currencies, Politics & Policy | No Comments »

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