S.Korea Protests Against Media Report Suggesting FX Manipulation

South Korea protested against a media report that suggested the country has been manipulating its currency. 

In a joint letter from the finance ministry and central bank, Korea said it hasn’t engaged in one-way intervention in the currency market, and that the nation’s current-account surplus is the result of structural factors like aging, and cheap oil, said Lee Young-joo, a spokesperson for finance ministry.

The letter was sent to the Financial Times following a report that said U.S. President Donald Trump’s anger over currency manipulation in Asia missed the target. "Evidence suggests Taiwan and South Korea, not China and Japan, are the worst offenders," the FT story said.

South Korean officials acknowledge that the nation conducts "smoothing" operations at times of heightened volatility in the currency market, but reject the idea that they aim to weaken the currency for competitive advantage.

Finance Minister Yoo Il-ho repeated this stance this week, telling lawmakers that the government only intervenes when there is rapid volatility. He also said Korea is considering various measures to increase imports of U.S. manufacturing goods.

The won appreciated about 6 percent against the dollar so far this year, having weakened 9 percent during the preceding two years.

Korea was listed on the Treasury Department’s currency watch list in October, along with China, Japan, Germany, Taiwan, and Switzerland, because it met two of the three criteria used to monitor currency practices: a current-account surplus over 3 percent of gross domestic product, and a bilateral trade surplus of more than $20 billion.

Korea’s current-account surplus in 2016 was about 7 percent of GDP, higher than the ratios for China and Japan.