South Korea and Japan have raised significant worries about the devaluation of their respective currencies and have indicated their willingness to combat any extensive fluctuation in exchange rates. Following a meeting between South Korean Finance Minister Choi Sang-mok and Japanese Finance Minister Shunichi Suzuki in Washington, the two countries have announced their readiness to implement measures to address the volatility in currency markets.
The recent strength of the U.S. dollar against various currencies, including the won and yen, has been primarily attributed to diminishing expectations of immediate interest rate cuts in the United States. Consequently, the won saw a 1.26% increase to 1,382.6 per dollar, rebounding from a 17-month low, while the yen hit a 34-year low at 154.79 against the greenback. Both finance leaders have acknowledged the need to stabilize these market movements and are prepared to undertake measures to address the situation effectively.
Market speculations are rife regarding the possibility of Japanese authorities intervening by buying yen, particularly as the dollar approaches the crucial threshold of 155 yen. Analysts have varied opinions on the likelihood of such interventions and their potential impact, with some, like Toru Suehiro from Daiwa Securities, suggesting that any intervention might be short-lived and have limited effects on the market dynamics. Meanwhile, Bank of Korea Governor Rhee Chang-yong has indicated that the central bank is also ready to implement measures to soothe market concerns, emphasizing the need to address the significant currency fluctuations witnessed recently.