Sept. 15 (Bloomberg) -- A South Korean official said his nation shouldn’t be blamed by Japan for the won’s weakness against the yen because investor sentiment is the cause rather than any government policy of suppressing gains.
Deputy Finance Minister Choi Jong Ku said in an interview in Seoul today that reported comments by Japan’s top trade negotiator Hideichi Okada had shown a “lack of understanding.” Last week, Dow Jones quoted Okada as expressing concern that the exchange rate posed a challenge for Japanese industries. The Japanese official declined to comment today.
“The Korean government’s stance is to respect market movements, and only to seek to stabilize excessive fluctuations,” Choi said by phone. “The strengthening of the yen versus the won is because investors favor safe assets, not because of the Korean government’s policy.”
A global economic slowdown may fuel trade and currency tensions among nations fighting to keep their exports competitive. Japan has intervened to weaken a yen that has touched post World War II highs against the dollar and Switzerland has also weakened its currency.
The yen traded at 14.43 won as of 12:26 p.m. in Tokyo today, strengthening 14 percent since April 11. The gain adds to the burden on Japanese exporters as the nation struggles to recover from a March earthquake and tsunami and three straight quarters of economic contraction.
There was speculation that South Korean authorities intervened to stabilize currency movements yesterday, when the won dropped 2.7 percent against the dollar after a two-day public holiday, said Lee Jin Ill, a Seoul-based senior currency dealer with Hana Bank.
The won traded at 1,099.38 per dollar today. The currency weakened to as low as 1,597 on March 6, 2009 as a worsening global financial crisis prompted financial companies to hoard the greenback.
Finance Minister Bahk Jae Wan said today investors shouldn’t worry about the Korean economy as the nation has sufficient foreign-exchange reserves and manageable short-term external debt. The nation has built up reserves of $312 billion, a sign that it may have intervened to stop the won from appreciating.
--With assistance from Toru Fujioka in Tokyo and Eunkyung Seo in Seoul. Editors: Paul Panckhurst, Sandy Hendry.
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