ID :
23362
Thu, 10/09/2008 - 10:54
Auther :
Shortlink :
http://m.oananews.org//node/23362
The shortlink copeid
Gov't urges large conglomerates to refrain from hoarding dollars
By Lee Joon-seung
SEOUL, Oct. 8 (Yonhap) -- The government on Wednesday urged large conglomerates to refrain from holding onto large amounts of U.S. dollars that are contributing to the Korean won's downward spiral.
The Ministry of Strategy and Finance said that the recent plunge in the value of
the Korean currency is excessive in light of South Korea's overall economic
fundamentals, and warned that hoarding the greenback could backfire if the
exchange rate moves sharply in the opposite direction.
The Korean currency plunged almost 5 percent or 66.90 won to close at 1,395.00
won to the dollar Wednesday. The drop caused the won to drop to its weakest level
since September 1998 and has raised concerns of acute shortages of dollar
liquidity.
"Since there really is no reason for the steep plunge, it may not be wise for
businesses to continue withholding sales of the dollar," Choi Jong-ku, head of
the ministry's international financial bureau said.
The official added that while such practices are understandable, since large
companies can make more money by converting a strong dollar for a weak won, it is
detrimental to the economy and to the companies themselves down the road.
Most South Korean conglomerates are exporters and receive payments in dollars.
Government insiders have speculated that these companies have started to delay
converting their foreign currency holdings into the won in recent weeks.
Choi then stressed that most experts concurred that there is no reason for the
level of economic concern and that "overshooting" is taking place.
The financial expert said that while some media reported South Korean banks were
facing insolvency, such speculations were wrong and very misleading.
"We have run all possible scenarios in regards to debt payment obligations, but
have found foreign reserves held by banks exceeding their debts," he said, making
clear that the country is not heading for another financial crisis similar to the
won that cripled it in 1997-98.
yonngong@yna.co.kr
(END)
SEOUL, Oct. 8 (Yonhap) -- The government on Wednesday urged large conglomerates to refrain from holding onto large amounts of U.S. dollars that are contributing to the Korean won's downward spiral.
The Ministry of Strategy and Finance said that the recent plunge in the value of
the Korean currency is excessive in light of South Korea's overall economic
fundamentals, and warned that hoarding the greenback could backfire if the
exchange rate moves sharply in the opposite direction.
The Korean currency plunged almost 5 percent or 66.90 won to close at 1,395.00
won to the dollar Wednesday. The drop caused the won to drop to its weakest level
since September 1998 and has raised concerns of acute shortages of dollar
liquidity.
"Since there really is no reason for the steep plunge, it may not be wise for
businesses to continue withholding sales of the dollar," Choi Jong-ku, head of
the ministry's international financial bureau said.
The official added that while such practices are understandable, since large
companies can make more money by converting a strong dollar for a weak won, it is
detrimental to the economy and to the companies themselves down the road.
Most South Korean conglomerates are exporters and receive payments in dollars.
Government insiders have speculated that these companies have started to delay
converting their foreign currency holdings into the won in recent weeks.
Choi then stressed that most experts concurred that there is no reason for the
level of economic concern and that "overshooting" is taking place.
The financial expert said that while some media reported South Korean banks were
facing insolvency, such speculations were wrong and very misleading.
"We have run all possible scenarios in regards to debt payment obligations, but
have found foreign reserves held by banks exceeding their debts," he said, making
clear that the country is not heading for another financial crisis similar to the
won that cripled it in 1997-98.
yonngong@yna.co.kr
(END)
