The government, the Bank of Korea, and financial authorities have diagnosed that the domestic financial and foreign exchange markets are experiencing high levels of volatility and have decided to strengthen efforts to stabilize the markets. In light of the 24-hour opening of the foreign exchange market, they will significantly enhance the monitoring system during nighttime hours and will announce a 'roadmap for the internationalization of the won' within this month.
On July 8, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol held a joint market situation review meeting at the Government Complex in Seoul to discuss recent trends in the financial and foreign exchange markets and response strategies. The meeting was attended by Bank of Korea Governor Rhee Chang-yong, Financial Services Commission Vice Chairman Kwon Dae-young, and Financial Supervisory Service Senior Deputy Governor Lee Se-hoon.
Participants noted that while exports and the current account are at record high levels, the domestic financial and foreign exchange markets are experiencing high volatility due to expectations of rising global policy interest rates and continued outflows of foreign capital.
The government and related agencies are closely monitoring the potential for renewed geopolitical tensions while aiming to harmoniously implement macroeconomic policies that consider growth, inflation, financial market stability, and the livelihood economy. They also plan to continue efforts to stabilize individual market sectors.
The stock market has seen increased volatility due to profit-taking by foreign and institutional investors following a recent surge, as well as sell-offs for rebalancing purposes and global AI economic outlooks. Authorities will closely examine risk factors that could lead to excessive volatility in the stock market.
In the bond market, while the volatility of government bond rates has somewhat eased in July, changes in domestic and foreign monetary policy trends could pose risks. The government plans to adjust the issuance ratio of long-term government bonds based on market supply and demand conditions to ensure stability.
Regarding the foreign exchange market, participants assessed that volatility has increased due to continued stock sales driven by rising values of foreign-held stocks, a strong U.S. dollar, and a weak yen.
They anticipate that the convenience of won transactions will significantly improve following the 24-hour opening of the foreign exchange market on July 6. However, they agreed to enhance the 24-hour monitoring system as volatility may still occur during nighttime hours.
The 'roadmap for the internationalization of the won,' aimed at increasing the convertibility of the won and its utilization in current and capital transactions, will be finalized and announced within this month. The government envisions enhancing the market's responsiveness to external shocks through improvements in the foreign exchange market structure and expanding the base for won transactions.
During the meeting, participants also reviewed economic trends across major industries. They diagnosed that there is a differentiation in economic performance between the non-IT sector and the semiconductor-focused IT sector. In particular, fluctuations in the semiconductor sector have a significant impact on the overall stock market, leading to an increase in the semiconductor sector's share, which is contributing to heightened volatility in the financial markets.
As a result, there was consensus on the need to enhance the competitiveness of key industries such as semiconductors and AI, while also actively discovering and nurturing next-generation growth engines in non-IT sectors such as bio, defense, and aerospace.
* This article has been translated by AI.
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