Ruling, opposition parties clash over Lee's 'temporary' high exchange rate remark

By Joo So-hyun, The Herald Business

President Lee Jae Myung's assessment at his first-anniversary press conference Monday that the high exchange rate is "temporary" drew sharply divergent responses from the ruling and opposition parties. The Democratic Party of Korea said it would take firm action against speculative moves exploiting the weak won, while the People Power Party said the remark revealed "not a policy diagnosis, but low-level self-consolation."

Han Jeong-ae, the Democratic Party's policy committee chairwoman, told a floor leadership meeting at the National Assembly on Tuesday that the government was well aware of concerns about the economy — including the high exchange rate and elevated prices — as the Middle East war passed its 100th day. "Our government is closely monitoring market conditions and has mobilized emergency responses," she said.

On the exchange rate specifically, Han said the government had decided to monitor foreign exchange and foreign currency funding markets and to respond firmly to speculative moves and market-disrupting behavior exploiting the weak won trend, beyond supply-and-demand factors. The remarks appeared to align with President Lee's suggestion at the press conference that rebalancing by foreign investors was one factor behind the high exchange rate.

At Monday's press conference, Lee had been asked about his policy goals and plans for the exchange rate. "A target rate is hard to set, but an appropriate rate exists," he said. "Things don't seem normal right now. It looks temporary." He also said that as South Korean share prices had risen sharply, the proportion held by foreign investors had grown, pushing their exposure to Korean assets to around 6 to 7 percent of their portfolios. "They have to sell to maintain their internal rebalancing targets, and when they sell, they convert to dollars," he said.

The People Power Party sharpened its criticism of Lee's "temporary" characterization, saying the remark laid bare the economic thinking of his administration.

Rep. Ahn Cheol-soo wrote on his Facebook page Tuesday that "the exchange rate is no longer a one-off shock." He said that if profit-taking were the only cause, the rate should fluctuate briefly before returning to its previous level. "But the won's weakness in the real world has continued as a trend for months," he wrote. "That means it is a structural weakness that cannot be explained by temporary supply-and-demand shifts."

Ahn added that "dressing up the rise in the exchange rate as a byproduct of growth is a clear evasion of responsibility." He said that at Monday's press conference, no concrete plan to stabilize the foreign exchange market — the most urgent need right now — could be found anywhere. "The 'meoksanism' and 'jalsanism' President Lee promised are nowhere to be seen, and South Korea now stands at the threshold of 'motsanism,'" he said, using informal Korean terms for economic well-being and hardship.

People Power Party leader Jang Dong-hyeok also raised the exchange rate at a press conference on current affairs Monday, saying Lee was "just offering idle talk about how the worst-case scenario can be avoided." He said the president needed to stop merely declaring that the people's livelihoods were the sole standard of governance and instead provide real answers to the livelihood crisis.