Kang Says S. Korea's Priority Is on Stabilizing Currency Market

By Seyoon Kim

Oct. 6 (Bloomberg) -- South Korean Finance Minister Kang Man Soo said the government's priority is on stabilizing the currency market, as the won touched the lowest since 2002 today.

``In terms of time and effort put in, we place utmost priority in stabilizing the domestic foreign-exchange market,'' Kang told lawmakers at the annual parliamentary audit in Gwacheon today. ``Next is to try to ensure the financial turmoil doesn't hurt the real economy.''

The Bank of Korea intervened today after the currency fell as much as 5.6 percent to 1,292.50 per dollar, dealers said. The drop prompted policy makers to sell the U.S. currency, according to Lee Myung Hoon, a foreign-exchange dealer with Industrial Bank of Korea in Seoul.

The won lost more than 26 percent of its value this year, the world's worst-performing major currency, according to data compiled by Bloomberg. The finance ministry today said it will take measures to stabilize the currency when the won's movements are ``excessive.''

``It's important for the authorities to actively take steps, use the foreign-exchange reserves to prevent investor confidence from eroding further, and to help improve liquidity,'' said Lim Jiwon, an economist at JPMorgan Chase & Co. in Seoul.

Local companies face higher costs for raising funds overseas amid a global credit crunch that triggered more than $580 billion in writedowns and credit losses at the world's biggest financial firms in the past year.

Relief for Exporters

The government said last week it will supply $5 billion to the Export-Import Bank of Korea to provide discounted promissory notes that allow exporters to receive funds from overseas trade more quickly.

South Korea has said it will make at least 4.3 trillion won ($3.4 billion) in extra loans and other financing tools available to small and medium-sized companies struggling with rising costs and losses related to currency movements.

Kang said the nation has ``sufficient'' foreign exchange reserves to help ease the credit crunch. Foreign reserves fell for a sixth month in September to $239.7 billion, from $243.2 billion in August, after authorities provided dollars in the swap market, according to central bank data.

``The $239.7 billion of reserves is available to turn into cash immediately,'' the finance ministry said. The International Monetary Fund and Fitch Ratings said the reserves are ``sufficient,'' the ministry said.

``There are too many concerns and those can cause a self- fulfilling crisis,'' the ministry said. ``The government will encourage banks to make efforts to improve their liquidity.''

Finance Minister Kang today urged banks to sell overseas assets to raise money they can use to boost lending as companies struggle with rising foreign-currency borrowing costs.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net