The US and South Korea agreed on Wednesday to reserve them in the fight against excessive volatility, rather than manipulating foreign exchange rates for trade advantages. The decision does not include bilateral currency swaplines.
According to a joint statement released on October 1, the US and South Korea reaffirmed their commitment to avoid manipulating the international monetary system, as outlined in the IMF contract clause. The initiative aims to present effective payment balance adjustments and unfair competitive advantages.
The parties aim to prevent unfair competitive advantages
Washington and Seoul also agreed that macroprudential or capital flow measures will not target trade advantage exchange rates. Decisions from both countries reflect AN agreement It was announced in August between the US and Japan.
In Japanese trading, there was no mention that the foreign exchange rate must determine the market. Unlike Japanese transactions, the US South Korea Agreement provides that both countries continue to monitor the stability of their currency markets.
The statement also emphasized that government investment instruments will invest abroad for risk-adjusted returns and diversification purposes and not target exchange rates for competitive purposes. South Korea’s national pension services, the world’s third largest pension fund, was not explicitly mentioned in the statement. The fund has emerged as a point concern In negotiations for trade in Seoul with Washington.
The report revealed that the US remains on South Korea’s list to monitor its foreign exchange policy. Seoul was removed from the list in November 2023 for the first time since April 2016, but reappeared in November 2024. South Korea is using NPS funds for exchange rate intervention, and the US says that the use of funds for foreign exchange hedges could affect South Korea’s victory.
The US Treasury said in a foreign exchange report released in June that the exchange line between NPS foreign assets and the Bank of Korea had skyrocketed. The report raised concerns among market participants that it could be viewed as a tool for currency intervention. Seoul has also requested the exclusion of bilateral currency swaplines to address the foreign exchange impact of its $350 billion investment package I agree By both parties during trade negotiations in July.
“The agreement can be interpreted as meaning that, as long as these standards are supported, it is unlikely that South Korea will be designated as a currency manipulator, as long as these standards are supported.”
– Jun Yoo-jin, CEO of South Korea’s Ministry of Economics and Finance.
The US and South Korea agreed that market interventions should be used to tackle excessive volatility and disorderly movements in exchange rates. The two countries also agreed that market intervention is considered equally appropriate to combat overly unstable or disorderly depreciation or gratitude.
Seoul plans to exchange market operations monthly with the US
The statement also reveals Seoul I agree Market intervention work is exchanged with the US every month. South Korean officials also said public disclosures will continue to be made every quarter with a three-month delay.
South Korea discloses its foreign exchange reserve data and transfer positions each month to enhance communications and monitor the development of the foreign exchange market. The country does that too reveal Despite the data already being published, the central bank’s currency composition is reserved on an annual basis.
Seoul was on the agenda during the opening round of trade negotiations in April, and is maintaining monetary policy consultations with the US through channels between finance officials. The country’s Treasury Ministry acknowledged that the latest initiative will reaffirm the importance of close communication and mutual trust between financial authorities in both countries to ensure stability in the foreign exchange market.
In July, the two countries agreed to reduce US tariffs on South Korea’s imports, including cars, from 25% to 15%. South Korea has also pledged to invest $350 billion in the US as part of the deal, but the initiative has stagnated due to Seoul’s concerns over the impact of foreign exchange.
Join BIBit today to earn up to $30,050 in trading rewards