South Korea finally announced restrictions on currency trading for banks that aim to control short-term foreign debt and volatility in the stock market. Authorities worry about the swing that won value will continue to increase or decrease drastically.
This happens due to the impact of turbulence since the debt crisis of Europe. This control plan had been called since berpekan-week ago. Assessed the current market conditions began at risk for the exporting country in the world number nine. New regulations provide limits to banks and other financial institutions. “This step aims to reduce the volatility of capital movements that cause systemic risk, rather than controlling the exchange rate at a specific value,” said a joint statement the Ministry of Finance of South Korea, and South Korea’s central bank, these two financial regulators.
The Korean government is considered necessary to prepare security tools that can cope with domestic conditions, such as high volatility in capital flows. This step is also referred to as global trends that increasingly stringent rules on bank activities. This restriction will apply from October and applies to all domestic and foreign banks. However, branches of foreign banks will be affected by this rule earlier. Korea’s financial authorities to explain the economy more vulnerable to market fluctuations compared to other countries. Therefore, the burden of short-term foreign debt is very high. Debt is equivalent to 60 percent of foreign exchange reserves. This ratio is two times greater than the ratio in Malaysia or Indonesia.
The amount the ratio reflects the imbalance in the market due to U.S. dollar selling in large numbers by major exporters. Currently the volume of short-term debt increased, giving rise to an increase in U.S. dollar demand suddenly