South Korea announced plans to ease restrictions on foreign exchange trading to bolster financial stability and boost domestic demand. The move comes amid political turmoil and weakening consumer confidence.
SEOUL – South Korea released policy plans on Thursday to spur foreign inflows for stability in financial markets and boost domestic demand amid weakening consumer confidence, as the economy faces heightened uncertainty from an unprecedented political crisis .
The finance ministry said in economic policy plans for the year ahead that it would permit registered foreign financial institutions to engage in foreign exchange trading for current transactions, including export and import settlements, from mid-January.South Korea has been gradually implementing measures to widen the use of the won in global markets and allowed foreign institutions to trade the won onshore directly using the domestic interbank system from last year.Allowing Registered Financial Institutions (RFI) to facilitate foreign exchange deals for trade settlement purposes would be expanding their business scope as they can currently trade the won only for securities trading such as stocks and bonds.The initiative is a step toward enabling investors to trade the won more freely after the government extended trading hours for the onshore won and foreign exchange swap markets to 2 a.m. (1700 GMT/1 a.m. in Manila) from July, the closing of London business hours.'This means that RFIs are now able to conduct virtually all areas of foreign exchange trading to meet actual demand,' said You Chang-yeon, finance ministry director.The ministry also said it would deploy contingency plans to stabilize financial markets if needed and vowed to closely cooperate with major countries abroad to ease volatility.South Korea's Kospi stock market and won currency were the worst-performers in Asia last year, with declines of 10 percent and 13 percent, respectively, as political turmoil took its toll on investor sentiment.Asia's fourth-largest economy is battling a deepening political crisis after its president briefly imposed martial law in December, which provoked public outrage and led to his impeachmen
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