By Chunsik Yu
SEOUL (Reuters) – South Korean President Yun Seok-yol said on Friday the South Korean government will take steps to stimulate capital inflows and ensure that there are enough dollars in the local currency market, citing widespread uncertainty in the markets.
The South Korean won has lost about 16% of its value so far this year, as it got caught up in the massive shift to dollar assets by global investors as US interest rates rose sharply, and the war in Ukraine sent people fleeing to safety.
“The government will strengthen the safety valve by taking steps to improve the supply and demand situation of dollars in the foreign exchange market,” a statement from the presidential office quoted Yun as saying at a meeting of economic ministers.
He also said that preparations to reactivate the Stock Market Stabilization Fund will be completed during this month and that the government will take steps to stimulate foreign investment in the local stock and bond markets.
The Ministry of Finance said in a statement issued after the meeting that it will prepare to have ready-made tools for the authorities to provide financial institutions with foreign currency liquidity if necessary.
The central bank said early Friday that the country posted its largest current account deficit in more than two years in August as slumping global demand and rising global prices for raw materials pushed up the import bill.
Following the assurances provided by Yoon and the Ministry of Finance, the South Korean won trimmed its losses against the dollar to about 0.4% on the day from an early loss of 0.8%, although traders said the market was more affected by the recovery in the United States. Stock index futures contracts.
President Yun, whose approval rating has fallen sharply since taking office in early May, held the meeting as part of his weekly meetings on various issues.
A weekly Gallup Korea poll on Friday showed Yun’s popularity rebounded to 29% from 24% last week, when the rating matched the previous low of his presidency. His approval rating was over 50% in early June.
South Korea has been a frequent victim of global market turmoil, experiencing a quasi-sovereign default during the Asian financial crisis in the late 1990s and massive capital outflows during the 2008-2009 global financial crisis.