S. Korea's foreign currency liquidity stable: watchdog

SEOUL, Oct. 31 (Yonhap) -- South Korea's foreign currency liquidity remains sound enough to buffer against the impact of the end of U.S. quantitative easing and a rate hike, the country's financial watchdog said Friday.

The U.S. Federal Reserve this week decided to stop its monthly purchase of US$15 billion worth of bonds from next month, signaling the end of a fiscal policy that was meant to keep long-term interest low to boost the economy.

It also cited improving economic data, interpreted as hinting at an early rate hike. It is feared a rate hike will spark massive outflows of foreign money from emerging countries like South Korea, destabilizing their financial markets.

The foreign currency liquidity ratio of local commercial and state banks stood at 111 percent as of Oct. 27, far above the guideline of 85 percent, according to the Financial Supervisory Service (FSS).

The ratio measures the proportion of a bank's foreign currency assets maturing in three months or less to its foreign currency debts with the same maturity.

Their foreign currency refinancing rate for short-term loans reached 140 percent in October, up 23.9 percentage points in September, while the long-term refinancing rate soared 157.9 percentage points on-month to 312.2 percent.

Refinancing refers to the replacement of an existing debt obligation with another under different terms.

The watchdog said it will strengthen monitoring of local financial firms' liquidity conditions to ensure their readiness against volatility in the foreign exchange market caused by the end of the U.S. bond-buying program.

brk@yna.co.kr
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