SEOL: South Korea is to consider measures to boost capital outflows if the won continues to rise sharply, three people familiar with the matter said yesterday, a move that could help the trade-reliant nation deal with the economic effects of a surging currency.
While operations to curb the won’s volatility would continue, the nation’s foreign exchange authorities might also look into ways to spur investment abroad should the local currency appreciate on a consistent basis, the people told reporters. The government “can consider measures to spur FX outflows,” one of the people said.
A spokesperson for the South Korean Ministry of Finance declined to comment on the matter. Rising domestic interest rates, strong exports and heightened US scrutiny on South Korea’s foreign exchange regime have made it harder for Asia’s fourth-largest economy to tame the won’s gains.Measures that encourage capital out of the country could help policymakers remove some of the upward pressure on the currency without needing to use direct intervention in the foreign-exchange market, a sticking point in Seoul’s relations with the Washington. The US Department of the Treasury in October last year kept South Korea on a “monitoring list” of countries in its report foreign exchange policies of major trading partners, along with China, Japan and Germany.
