Bank of Korea Gov. Shin Hyun-song said Thursday that a currency swap agreement between South Korea and the United States would have "a positive psychological effect," but cautioned that "the purpose of a currency swap is mainly related to liquidity, and liquidity is not lacking in the current situation."
Speaking at a briefing before the National Assembly's Fiscal and Economic Planning Committee on Thursday morning, Shin responded to questions from Democratic Party of Korea lawmaker Moon Jin-seog about the high exchange rate environment. He said the dollar's strength partly reflects expectations of a shift in US monetary policy at the global level, but that Korea-specific factors — such as foreign portfolio rebalancing — are also at play.
He added that "supply-demand imbalances are an important determinant in the short term, but over the long term, fundamental values such as underlying economic strength also matter."
On measures to strengthen the won, including a currency swap, Shin said "there are consultations between governments and between central banks," adding that talks are continuing "within the framework of central bank cooperation."
On the exchange rate outlook, Shin said there is room for the won to strengthen, pointing to a sustained and sizable current account surplus. "The current account surplus continues to accumulate at a large scale, and looking at that economic situation, there is room for the won to turn stronger going forward," he said.
kimstar@heraldcorp.com
