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US keeps S. Korea on 'monitoring list' for foreign exchange policy

By Yonhap

Published : June 17, 2023 - 16:13

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This photo shows information on South Korea's stocks and currency movements on an electronic signboard at a Hana Bank dealing room in Seoul, Friday. (Yonhap) This photo shows information on South Korea's stocks and currency movements on an electronic signboard at a Hana Bank dealing room in Seoul, Friday. (Yonhap)

South Korea has again been placed on a list of countries to be closely monitored by the United States in terms of their foreign exchange policies, along with six other nations, the U.S. Department of Treasury has said.

Asia's No. 4 economy has been placed on the list, along with China, Germany, Malaysia, Singapore, Switzerland and Taiwan, according to the Treasury's latest foreign exchange policy report Friday (U.S. time). Compared with the previous release, Japan was removed from the list.

Countries are put on the monitoring list when they meet two of the three criteria set by the U.S. Trade Facilitation and Trade Enforcement Act of 2015, also known as the 2015 Act.

The three criteria are a bilateral trade surplus of over US$15 billion with the United States, a material current account surplus of more than 3 percent of a country's gross domestic product (GDP), and persistent, one-sided intervention in the foreign currency market in at least eight months of a year with net purchases of over 2 percent of an economy's GDP over a 12-month period.

South Korea only met one of the three, having a trade surplus of $37 billion, but stayed on the list as it "triggered at least two criteria in the last report."

In the last report, South Korea also met the criteria of a material current account surplus of more than 3 percent of the country's GDP, though it fell to 1.8 percent in the latest report.

South Korea has been on the list since April 2016, except for the first half of 2019.

Observers say South Korea is expected to be excluded from the list in the latter half of this year if it continues to meet only one criterion.

"Treasury estimates that the Korean authorities sold foreign exchange at increasing amounts throughout the first three quarters of 2022 in line with increasingly rapid won depreciation over the course of the year," it said, noting sales moderated in the fourth quarter amid "reduced depreciation pressure on the won."

"After supporting the economic recovery from the COVID-19 pandemic, the Korean authorities have deployed monetary and fiscal policies to arrest inflation and financial imbalance concerns while continuing to support vulnerable households," the U.S. Treasury said.

It also advised South Korea to utilize its "sizable fiscal capacity to support equitable and green growth policies that will raise incomes for vulnerable workers," while "avoiding an unnecessarily rapid fiscal expansion." (Yonhap)