ID :
25171
Sat, 10/18/2008 - 09:15
Auther :
Shortlink :
http://m.oananews.org//node/25171
The shortlink copeid
BOK to adopt open bidding for won-dollar swaps
(ATTN: UPDATES with market close and quotes in paras 10-13)
SEOUL, Oct. 17 (Yonhap) -- South Korea's central bank said Friday it will introduce an open bidding system for won-dollar swaps in an effort to supply more dollar liquidity to the local market.
The move comes as domestic banks face a severe dollar shortage, hit by the global
credit crunch. Currently, the Bank of Korea (BOK) signs swap deals with primary
banks, which in turn trade with other local lenders.
"This new trading system is expected to help ease recent market jitters in the
foreign currency market hit by the global financial turbulence," Ahn Byung-chan,
head of the central bank's international bureau, told reporters.
The central bank will hold auctions on a weekly basis starting on Tuesday, it
added.
"For the first bidding, about US$2 to 3 billion will be auctioned and the size of
the dollar supply will be increased gradually, but it depends on the global
market situation," Ahn added.
South Korea's foreign exchange market has been suffering from a dollar shortage
as banks and companies are scrambling to hoard the safer greenback on concerns of
a financial crisis sparked by the collapse of investment bank Lehman Brothers
Holdings Inc. A dollar shortage has pushed down the value of the won and local
stocks over the past few weeks.
"Local banks are having difficulties in borrowing overseas, but it is not true
that they cannot raise funds at all," Ahn said. "They have already secured funds
needed until the end of October and many of them have raised money needed until
end-November."
The won has dropped roughly 30 percent against the U.S. dollar so far this year
as overseas investors have continued to pull money out of local stocks, causing
Korean financial institutions to suffer a dollar shortage.
The central bank has pledged to continue providing U.S. dollars to the local swap
market until it stabilizes.
The local currency closed at 1,334 won to the greenback on Friday, up 39 won or
2.9 percent from the previous day's close, as sentiment was buoyed by the BOK's
move to supply dollars to more banks. A decision by Moody's Investors Service to
retain its A2 "stable" outlook for South Korea's sovereign ratings also boosted
investor attitudes.
"The BOK's move is good news for the Korean money and foreign exchange markets.
But the decision may not be strong enough to completely restore confidence in the
market," said Jeon Seung-ji, a currency analyst at Samsung Futures Inc. "If the
government unveils strong measures like state guarantees for inter-bank loans,
weak sentiment is likely to ease."
South Korea's foreign exchange reserves, the world's sixth-largest, reached
US$239.7 billion as of the end of September, down $3.53 billion from a month
earlier and marking a decline for the sixth straight month.
Foreign exchange authorities have unloaded some of their dollar holdings to fight
inflation by propping up the sliding local currency.
sooyeon@yna.co.kr
(END)
SEOUL, Oct. 17 (Yonhap) -- South Korea's central bank said Friday it will introduce an open bidding system for won-dollar swaps in an effort to supply more dollar liquidity to the local market.
The move comes as domestic banks face a severe dollar shortage, hit by the global
credit crunch. Currently, the Bank of Korea (BOK) signs swap deals with primary
banks, which in turn trade with other local lenders.
"This new trading system is expected to help ease recent market jitters in the
foreign currency market hit by the global financial turbulence," Ahn Byung-chan,
head of the central bank's international bureau, told reporters.
The central bank will hold auctions on a weekly basis starting on Tuesday, it
added.
"For the first bidding, about US$2 to 3 billion will be auctioned and the size of
the dollar supply will be increased gradually, but it depends on the global
market situation," Ahn added.
South Korea's foreign exchange market has been suffering from a dollar shortage
as banks and companies are scrambling to hoard the safer greenback on concerns of
a financial crisis sparked by the collapse of investment bank Lehman Brothers
Holdings Inc. A dollar shortage has pushed down the value of the won and local
stocks over the past few weeks.
"Local banks are having difficulties in borrowing overseas, but it is not true
that they cannot raise funds at all," Ahn said. "They have already secured funds
needed until the end of October and many of them have raised money needed until
end-November."
The won has dropped roughly 30 percent against the U.S. dollar so far this year
as overseas investors have continued to pull money out of local stocks, causing
Korean financial institutions to suffer a dollar shortage.
The central bank has pledged to continue providing U.S. dollars to the local swap
market until it stabilizes.
The local currency closed at 1,334 won to the greenback on Friday, up 39 won or
2.9 percent from the previous day's close, as sentiment was buoyed by the BOK's
move to supply dollars to more banks. A decision by Moody's Investors Service to
retain its A2 "stable" outlook for South Korea's sovereign ratings also boosted
investor attitudes.
"The BOK's move is good news for the Korean money and foreign exchange markets.
But the decision may not be strong enough to completely restore confidence in the
market," said Jeon Seung-ji, a currency analyst at Samsung Futures Inc. "If the
government unveils strong measures like state guarantees for inter-bank loans,
weak sentiment is likely to ease."
South Korea's foreign exchange reserves, the world's sixth-largest, reached
US$239.7 billion as of the end of September, down $3.53 billion from a month
earlier and marking a decline for the sixth straight month.
Foreign exchange authorities have unloaded some of their dollar holdings to fight
inflation by propping up the sliding local currency.
sooyeon@yna.co.kr
(END)
