Bank of Korea Extends Foreign Currency Liquidity Measures Until Year-End

The Bank of Korea has decided to extend its foreign currency liquidity supply measures until the end of the year in response to the surge in the won-dollar exchange rate. This move aims to support banks in securing foreign currency amid ongoing instability in the foreign exchange market and to alleviate upward pressure on the exchange rate.

On June 11, the Bank's Monetary Policy Committee held an emergency meeting and voted to extend the interest payment on excess reserves of foreign currency deposits for an additional six months until the end of this year.

Initially set to be a temporary measure from January to June, the extension was deemed necessary as the won-dollar exchange rate recently surpassed 1,500 won, increasing volatility in the foreign exchange market.

Foreign currency reserves refer to the mandatory reserves that financial institutions must hold when dealing with foreign currency deposits. The Bank of Korea supports banks in securing foreign currency liquidity more stably by paying interest on reserves that exceed the mandatory amount.

The interest rate applied to excess reserves will remain aligned with the target range of the U.S. Federal Reserve's policy rate.

Meanwhile, foreign exchange authorities are intensifying inspections against market disruption activities. Starting from the previous day, the Bank of Korea and the Financial Supervisory Service have begun foreign exchange inspections targeting banks engaged in foreign exchange operations. The inspections will primarily focus on foreign banks, with both written and on-site checks to assess speculative trading and potential market disruption activities.