SEOUL (Reuters) – South Korea’s financial watchdog said on Tuesday it recommended that local banks manage foreign-exchange liquidity positions more conservatively than in the past, given the dollar’s likely long-term strength.
The Financial Supervisory Service (FSS) said in a statement that the advice was given during a video conference with senior officials of major local banks and branches of foreign banks.
While the overall foreign exchange FSS said liquidity conditions appeared to be stable despite the South Korean won falling sharply against the U.S. dollar, the agency’s deputy governor Kim Young-joo advised banks to manage liquidity in a “more conservative” manner.
He said banks should ensure stable management of existing foreign exchange funds and suggested that they explore new financing channels.
South Korean President Yoon Seok-yeol and other senior officials say the 13 percent decline in the won against the dollar so far this year does not reflect any problems with domestic fundamentals, but is largely driven by widespread The US currency is strongly driven.
