The Financial Supervisory Service (FSS) has asked banks to manage foreign exchange liquidity more carefully.
The FSS held a meeting with representatives of banks on May 15 to check their foreign exchange liquidity.
“The meeting was to discuss the current forex market situations amid mounting uncertainties related to the ongoing trade disputes between the United States and China,” the FSS explained, adding, “Factors such as foreign exchange reserves and rates are still solid at this moment as with the fundamentals of the domestic economy.”
South Korea’s foreign exchange reserves totaled US$404 billion last month. In the first week of this month, the foreign exchange liquidity coverage ratios of general and special-purpose banks were 112.3 percent and 100.2 percent, respectively. Earlier this year, the minimum required level applied to the banks was adjusted upward to 80 percent.
Still, the ongoing depreciation of the won is leading to concerns. The won-dollar exchange rate rose from 1,069.5 won to over 1,188 won per U.S. dollar from June 7, 2018 to May 15, 2019. “The 11 percent rise is not excessive and has had no impact on the forex capital market,” the FSS said, continuing, “Mid- to long-term bond investments irrelevant to exchange rates currently account for 60 percent to 70 percent of foreign investments.”