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S. Korea to closely monitor financial markets amid heightened volatility
제목 없음 South Korea will closely monitor financial market developments and take proactive measures to stem volatility as concerns are growing that a global economic recession could affect the nation's stock and currency markets, a finance ministry official said Friday.

   In an emergency meeting held earlier in the day, the ministry, however, dismissed current market fluctuations as being excessive, saying that there is no reason to panic, given the country's current economic fundamentals.

   The meeting was convened as the South Korean stock market took a nosedive and the local currency dropped sharply, following overnight U.S. tumbles sparked by fears over another global recession and the European debt crisis.

   "We believe that the recent market instability stemmed from concerns over a double-dip recession in the U.S. and spreading anxiety over the fiscal crisis in Europe," the finance ministry said in a press release after completing the one-hour meeting.

   "The government will closely monitor financial market situations in cooperation with related agencies and take proactive actions to ease market anxiety," it added. The meeting was attended by key finance ministry officials in charge of economic policy and international finance affairs.

   The ministry said that it will hold another meeting on Sunday to better prepare for the market turmoil. Four financial organizations including the central Bank of Korea and the Financial Services Commission will join the gathering.

   Global financial markets have been experiencing turbulence recently, especially due to growing concerns over the debt crisis unfolding both in Europe and the U.S.

   Even after the recent last-minute deal in Washington to avert a much-feared debt default, financial markets still remain on edge over a possible double-dip recession in the world's largest economy as many of the latest economic indicators are showing worse-than-expected readings.

   South Korea's government said that there is a "low possibility" that the U.S. economy will slip into a double-dip recession, but that it will continue "closely" monitor the economic situation there.

   The finance ministry expressed concerns that there is a possibility that the Korean economy could get hurt by the recent market turbulence in the short term given that it depends a lot on trade but there is no reason to panic.

   "The Korean economy continues its economic growth and considering that it holds sufficient amount of foreign reserves and diversified export markets, there is no reason to excessively worry about our economy and financial markets," the ministry said.

   Experts still cautioned that volatility here could continue for the time being as long as shocks from the U.S. and European countries continue to weigh on investor sentiment.

   The toughened market conditions will also make it difficult for the central bank to raise interest rates this month, possibly posing a policy dilemma for the government as it struggles to bring runaway inflation under control.

   South Korea's consumer prices jumped 4.7 percent in July from a year earlier, the largest advance this year. The government said earlier that its top policy priority is to stabilize prices.

   "If the debt woes in the U.S. and Europe result in increasing the chances of a global recession, the government would be left with no chance to not just focus on price stability but also think about the nation's economic growth," said a bond dealer at a local bank.

   "Also at a time when the stock market plunges, it would be very tough to opt for a rate hike, which could come as yet another unfavorable risk (to the economy)," he added.

Source: Yonhap News (August 5, 2011)

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