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Denying reports, S Korea to continue intervention

South Korea's central bank yesterday denied a report that it would stop intervening in the currency markets, saying it would continue to do so to contain foreign exchange fluctuations.

According to the Financial Times, Bank of Korea Governor Park Seung said in an interview that the central bank, which has spent billions of US dollars in the foreign exchange markets to contain the won, would end the practice.

The report pushed the won up sharply against the US dollar, hitting 999.50 to the US unit at one point in morning trade.

The central bank, however, said in a statement that Park had been "misunderstood."

"The Bank of Korea will take necessary measures whenever the currency markets are unstable," it said. "Especially, we will not sit idly by if speculative funds come in to exploit a groundless news report."

Park reportedly told the FT that South Korea had no plans to increase its foreign exchange reserves.

"I believe that we now have sufficient reserves to secure our sovereign credibility so I do not anticipate increasing the amount of foreign reserves further," Park was quoted as saying.

"We now need to take more consideration of profitability and I think we're at a stage where we need to manage our reserves in a more useful way."

Although Park made no explicit comment on the won, the remarks were taken to imply that South Korea was now unwilling to undertake the intervention required to stem its currency's rise, the Times reported.

However yesterday, dealers said the central bank was apparently intervening in the market through state banks and a foreign bank, by buying US dollars and selling the won to prevent the won from rising further.

As a result, the US dollar rebounded to trade around 1,002 won later in the day before closing out at 1,005 won, compared with 1,005.20 Wednesday.

Dealers said the volume of government intervention was estimated at US$500 million for yesterday alone.
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