Ⓒ JoongAng Ilbo / JoongAng Ilbo Japanese version2022.07.20 07:55
The Treasury Ministers of Korea and the United States agreed that close policy cooperation is needed in the increasingly deteriorating global economic situation. Although the currency swap, which attracted attention as a measure to stabilize the foreign exchange market, was not concluded, the possibility of re-concluding the Korea-US currency swap in the future was left by clearly stating “foreign currency liquidity supply”. An official of the Ministry of Economy and Finance said, “By revealing that measures similar to currency swaps can be taken, it will have a positive impact on the swaying Korean foreign exchange and financial markets.” The South Korean government has announced its intention to participate in measures to respond to the situation in Ukraine requested by the United States, such as the upper limit on the price of Russian crude oil.
Choo Kyung-ho, Deputy Prime Minister and Minister of Economy and Finance, and US Treasury Secretary Janet Yellen announced the results of the meeting following the Korea-US Finance Ministers’ meeting held at a hotel in Seoul on the followingnoon of the 19th. Seven officials from both governments, including the two ministers, participated in the meeting on that day. The US Treasury Secretary has visited South Korea for the first time in six years since then, in June 2016. Yellen has visited Korea for the first time since taking office in January last year.
The conference covered a variety of topics such as global economic trends and outlook, including South Korea, Russia’s response to the invasion of Ukraine, foreign exchange market trends and cooperation, climate change response, and global health.
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In particular, the content to deal with uncertain global economic conditions such as the re-emergence of the new coronavirus, soaring raw material prices and inflation, and currency tightening was mainly discussed. The two ministers first sympathized with the importance of economic cooperation between Korea and the United States. “We agreed that closer policy cooperation is needed to thoroughly respond to global supply chain instability and unfair market distortion practices that weigh the burden on both people and businesses.” Clarified.
He also emphasized mutual cooperation and close mutual assistance in responding to the situation in Ukraine. In particular, the US side has asked for cooperation regarding the introduction of the Russian crude oil price upper limit system, and the South Korean side has begun to accept it. Janet Yellen once once more requested that South Korea actively participate in the introduction of the price cap system mentioned in the Korea-US Finance Ministers’ conference call on the 1st. In response, Deputy Prime Minister Aki replied, “I am sympathetic to the purpose of introducing the price cap system and am ready to participate.” However, it revealed that the price cap system must be effectively designed to contribute to international crude oil prices and consumer price stability.
The two countries reaffirmed their strengthening of cooperation over the financial and foreign exchange markets, but did not reach the conclusion of the currency swap, which received the most attention. A currency swap that exchanges currencies between countries on an equal footing means a transaction in which the currency of one’s own country is deposited in the other country and can be exchanged for the currency of the other country at a pre-arranged market price. The Korean-American currency swap, which was signed to stabilize the world financial markets in the early days of the Korona-ka, expired last year, but it was argued that it should be revived to minimize fluctuations in the foreign exchange market such as the plunge in the won.
It seems that the reason why currency swaps were not specifically discussed was that they were closer to the work of the US Federal Reserve Board (FRB) than the US Treasury. In addition, as the result of the meeting showed, the won-dollar exchange rate became more volatile, but the judgment that foreign currency liquidity in South Korea was good and stable also worked.
