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Bank of Korea or to exercise control on capital inflows
Bank of Korea data released on the 27th, said South Korea’s third-quarter gross domestic product grew 4.5%, the highest the lowest level this year.
Monetary Authority of Singapore said Oct. 27, in the face of the risk of massive hot money inflows, which may intervene to curb the Singapore dollar’s rise.
On the same day the Bank of Korea Governor Jin Zhongxiu also said, in response to large inflows of hot money, the local market, the central bank, or capital inflows would be to control, but stressed that the move will not Jin Zhongxiu the Group of Twenty summit in Seoul before the implementation.
Singapore hot money inflow
Monetary Authority of Singapore released the 27th annual macro-economic assessment, said that since late last year, the U.S. dollar’s continued weakness and the relatively positive economic outlook in Singapore, a large number of international hot money inflows in Singapore to promote Singapore dollar to appreciate. In view of this, the HKMA may intervene in currency markets to curb the upward pressure on Singapore dollar exchange rate. At the same time the Council also stressed that funds would be offset foreign exchange market intervention to maintain the stability of the monetary base in the country, interventions on current accounts in local banks have little effect.
Monetary Authority of Singapore pointed out that the hot money is pushing up the exchange rate of Asian economies and stock markets, “If the economies of the region can not effectively regulate the flow of funds, then the inflationary pressures caused by the disorderly return of capital may occur.” HKMA also also expected before the end of Singapore’s consumer price index will rise nearly 4% and remain high during the first half of next year, while the next two years, the annual inflation rate was 2.5% -3% and 2% -3%.
This month 14, the Monetary Authority of Singapore Singapore dollar exchange rate fluctuations unexpectedly announced the expansion of range, allowing a modest appreciation of Singapore dollar, thereby dilute inflationary pressures, and to avoid excessive currency appreciation. Data show that the Singapore dollar against the U.S. dollar this year has risen about 8%.
Risk of asset bubbles Bank of Korea warning
Bank of Korea Governor Jin Zhongxiu 27 in Seoul, said in a speech, large capital inflows will lead to exchange rate fluctuations and other risks and asset bubbles. He pointed out that control of capital inflows is an effective policy tool, despite the cause market distortions, and costly. He said, “We will consider the implementation of these measures, but that does not mean that we have made a decision. I think that we will not implement any measures inconsistent with international practice.”
Korea Exchange Bank this analysis, “though the weak dollar investment in South Korea to open more convenient for the channel, but will allow investors to control capital flows become less popular South Korean assets. Recently a lot of money into the stock and bond markets are speculative, If capital controls only for short-term capital inflows, then the gradual outflow of hot money will be. “
South Korean Vice Finance Minister for Planning Yan Zhongyong October 21 said the South Korean government is discussing measures to control capital flows, “we studied, including the Tobin tax, bank tax, and leverage control and many other measures. We are discussing these measures, but also did not make any decision. “
27 Bank of Korea data released by the decline in exports of South Korea the third-quarter gross domestic product grew 4.5%, the highest the lowest level this year. Analysts said the won exchange rate is strong in the third quarter led to an important reason for slowdown in exports. Season won-dollar exchange rate has risen about 7.2%, or ranking first in Asian currencies, the chain of Korean exports over the same period increased only 1.9%, down from 7.1% in the second quarter.
However, the economic statistics department of the Bank of Korea official said, as long as the U.S. dollar generally weakened against other currencies, the won appreciation would not have been a significant impact on exporters. In addition the bank also expects growth in domestic demand by promoting, South Korea, GDP growth in 2010 is expected to reach 6%.
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