South Korea Unveils Measures to Control Won

To help local firms better manage foreign-exchange risks and reduce imbalances that have made its market prone to volatility, South Korea’s Financial Service Commission has unveiled several measures to reduce the risks of swings in currency rates, says The Wall Street Journal.

 

The newspaper reports that among the changes, the Korean regulator will limit the size of forward transactions that South Korean companies can enter in the foreign-exchange market to a total value of no more than 125% of the revenue they are hedging. 

 

The rules, which will take effect next year, will also require asset-management firms to provide several options to hedge foreign-exchange exposure on overseas investment-fund products they sell, says the Journal.

 

Financial institutions, meanwhile, will be required to hold more than 2% of their foreign-currency assets in liquid assets carrying an investment rating of 'A' or higher. There is no such requirement now, says the Journal.

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