Seoul seeks expanded import insurance support to ease raw materials cost burden

The government has asked major South Korean exporters to join efforts to stabilize the foreign exchange market as the won-dollar rate has risen sharply, fueling volatility.

Vice Finance Minister Heo Jang and Ministry of Trade, Industry and Energy Vice Minister Moon Shin-hak held a meeting Thursday at the Government Seoul Complex with representatives of leading export companies to review recent foreign exchange market conditions.

A currency exchange booth at Incheon International Airport displays the real-time won-dollar exchange rate on Tuesday, as the high exchange rate persists amid uncertainty over US interest rate hikes and the prospects for a US-Iran end-of-war deal. [Yonhap]
A currency exchange booth at Incheon International Airport displays the real-time won-dollar exchange rate on Tuesday, as the high exchange rate persists amid uncertainty over US interest rate hikes and the prospects for a US-Iran end-of-war deal. [Yonhap]

Vice Minister Heo attributed the growing volatility in the foreign exchange market to geopolitical uncertainty stemming from the Middle East and portfolio adjustments by foreign investors following a rally in domestic stocks. He said that despite the rise in the exchange rate, South Korea's external financial health remains solid, underpinned by a record-high current account surplus and ample foreign currency liquidity.

Heo warned that a prolonged period of high exchange rates — even as the real economy continues to perform steadily — could increase the burden on businesses and households and act as a drag on the recovery of domestic demand. He called on export companies to play an active role in improving foreign exchange supply-and-demand conditions and reducing volatility. The meeting discussed measures including early conversion of export proceeds and expanding the repatriation of overseas retained funds.

Vice Minister Moon said active cooperation from companies is essential to minimizing the negative impact of the high exchange rate on exports and the domestic economy. He said the government would strengthen support measures, including expanding import insurance coverage, to help companies struggling with surging raw materials costs driven by the weaker won.

Companies at the meeting said excessive exchange rate volatility is raising the burden of currency risk management for exporters and widening business uncertainty. They agreed that foreign exchange market stability is more critical now than ever and pledged to cooperate more actively with the government's efforts to stabilize foreign exchange supply and demand.

Representatives from Samsung Electronics, SK Hynix, Hyundai Motor Co., Kia, HD Korea Shipbuilding, Samsung Heavy Industries and Hanwha Ocean attended the meeting.


y2k@heraldcorp.com