South Korea policy-makers see low impact from Fed but remain wary

[SEOUL] South Korean policy-makers said on Thursday the US Federal Reserve's decision to raise interest rates is unlikely to cause a significant blow to the country's markets, but maintained firm action would be taken if needed. "It is a relief that even despite the Fed rate hike, turbulence in global financial markets has not been large," said Vice Finance Minister Joo Hyung-hwan. Joo was chairing a meeting of policy-makers to discuss the outcome of the Fed policy meeting early on Thursday.

The South Korean won opened nearly flat at 1,175.5 versus the dollar on Thursday while stocks were up 0.8 per cent shortly after market open.

The vice finance minister said financial markets were likely to differentiate South Korea's economy from other emerging market economies, thanks to the country's strong fundamentals, which include massive foreign exchange reserves and its current account surplus.

The government is also ready to take aggressive action to stabilise markets if necessary and is wary of risks that may ripple from other emerging economies more vulnerable to global market turmoil.

Joo added market uncertainties about the pace at which the Fed will continue to hike rates remain a risk for market movements ahead.

The comments were in line with a Bank of Korea official who told Reuters earlier on Thursday that South Korea still faces capital outflow risk while the central bank issued a statement that it would seek out market stabilising measures with the government if necessary.

The vice finance minister said the government would continue to focus its efforts on the country's current objectives to maintain growth, which include curbing household debt and ensuring the recovery in domestic consumption keeps its momentum.

REUTERS