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S. Korea to actively use FX reserves to stabilize market: vice minister

According to Yonhap News,

SEOUL, April 3 (Yonhap) -- South Korea will actively use its foreign exchange reserves to provide adequate liquidity to the markets, the country's vice finance minister said Friday.

"Currently, the government is closely monitoring the debt-maturing schedules and other developments in the short-term money market and corporate bond market," Kim Yong-beom said after a weekly meeting in Seoul.

Kim insisted market concerns over a possible liquidity crunch have nearly been removed by a series of government measures that included a temporary reduction in the foreign exchange liquidity coverage ratio for banks.

The Bank of Korea has also signed a US$60 billion bilateral currency swap agreement with the U.S Federal Reserve. The government "will actively utilize the Korea-U.S. currency swap arrangement and its foreign exchange reserves to provide foreign exchange liquidity at opportune moments," Kim said.

South Korea -- a small, open economy -- depends heavily on exports and foreign capital investment, a situation that makes it vulnerable to external shocks. South Korea's central bank has already delivered some $8.7 billion in U.S. banknotes to local banks using its currency swap line with the U.S.

The central bank earlier said its foreign exchange reserves dropped by $8.96 billion in March -- the sharpest on-month decline since November 2008 --- due in part to its market stabilization measures. South Korea's foreign exchange reserves stood at $400.21 billion as of end-March. The amount marks the world's ninth largest.

Kim said the economic impact from the coronavirus outbreak may still be limited, noting the country's exports, in terms of volume, jumped by a 17-month high of 13.1 percent on-year in March.

"It is also true that uncertainties for our exports are continuing to expand due to a cut in demand in major import countries and damage to the global value chain caused by the spread of COVID-19," Kim said.

South Korea's exports, in terms of value, slipped 0.2 percent on-year to $46.9 billion last month. "A V-shaped recovery of the global economy may be difficult, but it is important for us to withstand this temporary difficulty as the global economy is expected to rebound after some time," Kim said.

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Source: Yonhap News (Apr. 3, 2020)

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