SEOUL, Jan 15 (Reuters) – U.S. Treasury Secretary Scott Bessent’s recent comments on the Korean won underscore the importance of foreign exchange stability for bilateral economic cooperation between Seoul and Washington, a senior South Korean official said on Thursday.
Deputy Finance Minister Choi Ji-young said currency stability was an important factor because volatility could hinder progress on a $350 billion U.S. investment pledged by the Asian country.
Bessent said on Wednesday he had discussed the recent depreciation of the won with South Korean Finance Minister Koo Yun-cheol, adding that the currency was not in line with the country’s economic fundamentals.
“The U.S. Treasury Department’s rare comments on South Korea’s foreign exchange market and its assessment that recent weakness in the won was undesirable reflect the fact that the won’s stable trend is an important factor for the implementation of strategic investments,” Choi told a briefing.
Finance authorities of the two countries will communicate and cooperate closely on the stability of the foreign exchange market, Choi said, noting their earlier agreement to delay investments in the case of market instability.
Seoul and Washington finalised in November a trade deal lowering U.S. tariffs on imports from the Asian ally, in return for a $350 billion investment package in strategic U.S. sectors, after months of negotiations over the foreign exchange implications of the investment package.
South Korea could seek an “adjustment in the amount and timing of the funding, and the United States will, in good faith, give due consideration to such request,” if investments are expected to cause disorderly movements in the foreign exchange market, according to the deal.
The Bank of Korea on Thursday signaled an end to its current easing cycle amid concerns about a weak won, after Koo vowed on Wednesday to take steps to rein in increasing volatility in the foreign exchange market.
Authorities are considering introducing new macro-prudential policies to ease discrepancies between recent foreign exchange conditions and macroeconomic fundamentals, Choi said.
South Korea’s ruling Democratic Party introduced a bill in November to establish a special fund to finance the $350 billion investment package. The bill has not been passed yet.
(Reporting by Jihoon LeeEditing by Ed Davies)
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