The US government has maintained its existing policy of designating South Korea as a country to observe exchange rates.
The US Treasury Department announced on the 10th (local time) that it included 12 countries, including South Korea, China, and Japan, in its exchange rate observation list in the first half of the exchange rate report released on the 10th (local time).
In addition to Korea, China and Japan, the target countries included Germany, Italy, India, Malaysia, Singapore, Thailand, Taiwan, Vietnam, and Mexico.
Treasury Secretary Janet Yellen said after the exchange rate report was released on the same day, "The (US) government strongly recommends that major trading partners use cautious policy measures to help the world economy recover."
Since the second half of last year, the Ministry of Finance has applied some changed standards to the evaluation of exchange rate policies.
Previously, in accordance with the Trade Promotion Act of 2015, ▲ trade surplus with the US exceeding $20 billion over the past year ▲ current account surplus exceeding 2% of gross domestic product (GDP) ▲ foreign exchange exceeding 2% of GDP for 6 out of 12 months If it falls under two out of three items, such as intervention in the foreign exchange market, which is a net purchase of
However, since the last report, the standard for trade surplus was adjusted to 15 billion dollars including goods as well as services, and the current account surplus was changed to 3% of GDP or 1% of GDP with a current surplus gap.
The foreign exchange market intervention was also changed to 8 out of 12 months.
Korea was listed as a country to be observed because of its trade surplus with the US ($22 billion) and current account surplus (4.9% of GDP).
Korea has been included in the list every time since April 2016, except for the first half of 2019.
The Treasury Department estimates that the won has depreciated 8.6% against the dollar over the past year and has fallen an additional 5.4% by the end of April this year.
He also analyzed that the reasons for the weakening of the won were the adjustment of the balance of goods in Korea due to the rise in commodity prices, and a significant outflow of capital due to the rise in global interest rates and heightened geopolitical uncertainty.
The Ministry of Finance estimated that most of the transactions took place in the second half of last year, saying that the 14 billion won net selling of foreign exchange reported by the Korean foreign exchange authorities had the effect of suppressing the won's weakness last year.
"Korea has a well-developed system and market," he said, adding that "currency intervention should be limited to the exceptional circumstances of a disorderly market."
The Ministry of Strategy and Finance explained, "As in the previous report, the U.S. Treasury used net transactions from the foreign exchange authorities published by South Korea instead of the U.S. estimate when determining the requirements for intervention in the foreign exchange market."
Taiwan and Vietnam, which were included in the in-depth analysis bureaus in the last report, have been downgraded to one level of observation this time.
The Ministry of Finance, however, maintained a deep observation on Taiwan and Vietnam, but evaluated that in the case of Taiwan, productive discussions are in progress and satisfactory progress has been made by signing an agreement with Vietnam.
The report also emphasized the lack of transparency in the overall exchange rate determination process without disclosing foreign exchange intervention data in China, and said it would closely monitor the exchange rate-related activities of state-owned banks in China.
China was designated as a currency manipulator in August 2019 and has maintained its status as a monitoring country since it was lifted in January 2020.
He pointed out that the sharp decline in the yen's value in Japan was due to the interest rate policy of the Japanese central bank.
(Photo = Getty Images Korea)