S. Korea ready to act in case of speculative attack on won: Official

S. Korea ready to act in case of speculative attack on won: Official

Agence France-Presse, Seoul

South Korea's top economic official said on Thursday the government would not sit idle in case of a speculative attack on the country's currency.

Finance and Economy Minister Lee Hun-Jai said foreign exchange rates must be determined by the market. "The government will not use the won-dollar rate as a policy tool."

"But the government will not sit idle" if speculative investors attack the country's foreign exchange market, he said, adding the government was closely monitoring the movement of foreign exchange rates.

"We will take action only if needed to stem any speculative movements ," he said.

The won continued to firm against the U.S. dollar on Thursday as many local companies sold off their dollar holdings even at a loss and their future dollar-denominated receipts.

"We're now facing even the 1,060 won level. The pace is too fast and there may be a correction, but any correction will be brief," a local dealer said.

The won has appreciated more than 10 percent against the greenback this year, putting pressure on exports.

The won's steady appreciation sparked concerns about South Korea's economy, which relies heavily on exports. A stronger won makes South Korea products more expensive abroad.

Lee admitted the economic outlook for 2005 "appears not to be very bright" due to high oil prices, slowed export growth and the sluggish construction sector.

But he said South Korea's economic fundamentals remained strong enough to overcome "difficulties in this transitional period." "Our economic situation is not so serious."

In a surprise move, the central Bank of Korea cut its benchmark interest rate target for November by 0.25 percentage points to 3.25 percent to stimulate growth. Some analysts said the cut was made under pressure.

Lee, however, noted the government would not intervene in the central bank's rate-setting process.