Financial Regulatory Forum

ANALYSIS-South Korea steps nearer to controlling currency risks

By Jonathan Thatcher

SEOUL, May 28 (Reuters) – South Korea looks increasingly close to imposing some form of foreign exchange controls, albeit relatively moderate ones, to try to stop gyrations in the won and end the constant risk of sudden capital flight.

The issue has been on the boil for months, but the won’s dive this week on a mix of the euro zone tremors and North Korea’s war-like rhetoric, appears to be persuading policy makers they must do something, though the turbulence makes the timing tricky.

Foreign bank branches are likely to be included in measures.

The question now seems to be less if, than when and how.

“I felt sick,” one senior official, involved in policy discussions, said of seeing such a scary fall in the won  early this week. He asked not to be identified.

At one stage on Tuesday, the won plunged 5 percent against the dollar, an unusually large move for a currency even in emerging markets.

At its low point, the won had dropped 6.5 percent from the end of last week. Then it turned and rallied 9 percent to close the week little changed.

ANALYSIS – Mexico’s central bank may tap brakes on peso surge

By Michael O’Boyle and Patrick Rucker

MEXICO CITY, April 6 (Reuters) – Mexico’s central bank could try to tap the brakes on a dogged appreciation in the peso before currency gains start to threaten the competitiveness of local exports.

The peso strengthened 6.0 percent in the first quarter to trade at its strongest in almost 1-1/2 years, thanks to a rebound in demand for Mexican exports from the country’s top trading partner the United States.

Mexico’s central bank has been buying U.S. dollars since March to build a war chest of reserves ahead of any possible volatility in global markets once the United States begins to raise interest rates. The program has also poured pesos into the market.