SEOUL, Mar 04 (AJP) - The Bank of Korea (BOK) issued a verbal intervention Wednesday, pledging a “timely” response after the Korean won briefly touched crisis-era levels around 1,500 per U.S. dollar amid escalating tensions in the Middle East and rising oil concerns.
The warning came after the dollar in the offshore market climbed above the 1,500-won mark overnight — the first time since March 2007 in the aftermath of the global financial crisis.
BOK Governor Rhee Chang-yong postponed his departure for Thailand, where he was scheduled to attend an International Monetary Fund conference, and instead presided over an emergency meeting at the central bank.
“Volatility in financial markets — including foreign exchange, interest rates and equities — may be inevitable depending on developments in the Middle East,” the bank said in a statement after the meeting.
The BOK warned it would respond to “excessive movements” that diverge from economic fundamentals and work with the government to correct any “one-sided” market bias.
Seeking to calm investors, the central bank said Korea’s financial system remains liquid and that key external risk indicators — including sovereign borrowing spreads and credit default swap (CDS) premiums — remain stable.
As of Tuesday, the CDS premium stood at 25.555 basis points, up 0.53 percent from the previous day.
Although the premium had declined for seven consecutive trading days since Feb. 23, it remained near the psychological stability threshold of 25 basis points. By comparison, during the global financial crisis CDS spreads fluctuated around 600 basis points.
As of 11:11 a.m., the Korean won traded at 1,480.30 per dollar, marking a decline of nearly 3.9 percent from its Feb. 26 close before the weekend attacks on Iran.
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