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.