The Korean won surpassed 1530 against the U.S. dollar during trading on June 4, reaching its highest level in over two months. In response, the government convened a joint inspection meeting with relevant agencies to strengthen risk management in the financial and foreign exchange markets. Officials cited increasing volatility in the foreign exchange market due to the prolonged conflict in the Middle East and a rise in foreign stock selling, stating they would respond immediately to excessive market fluctuations.
Koo Yun-cheol, Deputy Prime Minister and Minister of Finance and Economy, held a market situation inspection meeting at the Government Seoul Complex with Bank of Korea Governor Lee Hyun-sung, Financial Services Commission Chairman Lee Ok-won, and Financial Supervisory Service Chairman Lee Chan-jin to discuss recent trends in the financial and foreign exchange markets and potential responses.
On this day, the exchange rate in the Seoul foreign exchange market exceeded 1530 won per dollar for the first time since March 31. Analysts attribute this surge to heightened geopolitical risks stemming from the ongoing conflict in the Middle East and increased demand for dollars as foreign investors continue to sell off stocks.
Participants in the meeting assessed that despite a record-high current account surplus, the foreign exchange market is experiencing increased volatility due to the ongoing conflict and continued foreign stock selling. They noted that the recent surge in the domestic stock market has led to adjustments in foreign investors' holdings and profit-taking, further exacerbating exchange rate fluctuations.
So far this year, foreign investors have sold a total of 127 trillion won in stocks, with a recent streak of 18 consecutive trading days of net selling amounting to 66 trillion won. The government views this capital flow as a potential source of instability in the foreign exchange market and plans to closely monitor related trends.
Koo emphasized, "In a situation with high external uncertainties, we are closely watching to prevent the spread of anxiety, and we will take necessary measures immediately in the event of excessive market concentration."
The government also decided to enhance its response to volatility in the bond market. Meeting participants noted that fluctuations in government bond yields have increased due to global interest rate trends, inflation concerns, and expectations of domestic interest rate hikes. They agreed to communicate closely with market participants and respond promptly through inter-agency cooperation if excessive volatility arises.
Additionally, the rapid increase in margin trading amid a bullish stock market was identified as a potential risk factor. The balance of margin trading loans rose from 27.3 trillion won at the end of last year to 38 trillion won as of June 1. The government plans to continuously monitor the trend of increased stock trading through borrowing and strengthen proactive risk management and investor protection.
* This article has been translated by AI.
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