SEOUL: South Korea said on Sunday it will reduce the amount of long-term government debt sales next month to stabilise markets following gyrations on news that the US Federal Reserve may start tapering its bond-buying programme later this year.
The finance ministry, in a statement, said it will also take countermeasures against any excessive fluctuation in the value of the won. It did not give specifics, however.
Yield on the benchmark 10-year treasury bonds surged by a total of 34 basis points on Thursday and Friday as investors prepared for the eventual unwinding of the Fed's monetary stimulus. Korean stocks and the won also fell sharply following the Fed news, raising concerns about the risk of a surge in foreign capital outflows akin to the previous crisis in 2008.
Dealers said local authorities sold dollars late Friday to support the won, backing up comments from Finance Minister Hyun Oh-seok earlier in the day that Seoul would act swiftly to stabilise markets if necessary.
But policymakers and market analysts have played down the possibility of a capital flight from South Korea, given the country's strong foreign reserves, fiscal health and reduced dependence on short-term external debt.
The finance ministry said on Sunday that foreign net investment in local debt rose by 369.8 billion won ($320.94 million) won Thursday and Friday, suggesting that offshore investors remain interested in won-denominated assets despite recent market gyrations.
Nevertheless, the ministry said it would closely monitor market conditions and seek to strengthen global cooperation to reduce volatility in financial markets at the G-20 finance ministers' meeting scheduled for July.
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