SEOUL-- South Korea plans to take measures to stabilize the financial market if there is excessive herd behavior in the wake of the U.S. central bank's annual Jackson Hole meeting, a senior government official said Monday.
First Vice Finance Minister Bang Ki-sun also said the government will closely monitor Korea's currency and bond markets with "extra" caution as the domestic market has moved in tandem with U.S. markets.
U.S. stock markets nosedived Friday after Federal Reserve Chair Jerome Powell reaffirmed a hawkish monetary policy stance during his speech at the Jackson Hole economic symposium last week.
Powell said the U.S. central bank will raise interest rates "for some time" to tame inflation and the move could bring "some pain" to households and businesses with slower growth and job losses.
"As South Korea's financial market is deeply coupled with movements in U.S. and other major markets, there is a need for close monitoring and responses," Bang said at a meeting.
"The government will step up policy efforts to stabilize the market to brace for excessive herd behavior in the market," he added.
Lee Bok-hyun, head of the Financial Supervisory Service, a financial regulator, held a meeting to discuss the impact of the Fed's chair's remarks at the Jackson Hole meeting and vowed to intensify monitoring of market situations that have shown a "complicated" and "prolonged" tendency of volatility that warrants closer cooperation among relevant agencies.
He, however, noted that the local financial sector is strong enough to weather external risks given that its asset health and dollar liquidity have improved significantly in the process of experiencing past crises.
Tracking tumbles in the U.S. market, South Korea's main stock index opened sharply lower. The KOSPI sank 2.3 percent to trade at 2,424.09 as of 10:15 a.m. The local currency was trading at 1,344.80 won against the dollar, down 13.50 won from the previous session.
The South Korean currency has sharply fallen against the U.S. dollar in recent months amid the Fed's aggressive monetary tightening.
The local currency fell below the 1,340-won level per dollar for the first time in more than 13 years Tuesday. The won has weakened about 11 percent against the greenback so far this year.
Bond yields, which move inversely to bond prices, also jumped in recent trading amid global rate hike drives.
The finance ministry said last week it will buy back Treasury bonds and take steps to help curb a rise in bond yields, when needed, if the bond market shows jitters.
Source: Yonhap News Agency