SEOUL: The International Monetary Fund, which has previously urged South Korea against intervening in the currency market, says the won has moved in line with market trends in the past six months, suggesting authorities refrained from forceful intervention.
Recent central bank data shows foreign exchange reserves have inched down over several months, a sign that authorities in the export-reliant economy have veered away from the aggressive dollar buying of the past when the won rose sharply.
"From the data that are available, the exchange rate has been market-determined for the last six months I think, so the government is pursuing their policy of exchange rate flexibility at the moment. We think that's the right thing to do," said IMF division Chief Brian Aitken in an interview with Reuters.
South Korean foreign exchange authorities are known to step into the market in times of volatility, usually to weaken the won against the dollar in order to support exporters, according to traders and analysts.
That has sparked complaints from the United States and IMF in the past, with the IMF's report last year saying there is no need for further accumulation of foreign exchange reserves through intervention.
Local policymakers in recent months have said that although they engage in smoothing operations to lessen fluctuations, they refrain from fighting against the tide.
While the won reached five-year highs last year, the dollar began strengthening dramatically in November, pressuring the won and other Asian currencies.
Aitken also said South Korea's household debt burden does not pose an imminent threat to the financial sector.
"One of the very interesting things about Korean households too, is that while debt is rising as share of income, so are assets. So they're not borrowing to spend," he said.
Earlier on Friday, data showed South Korean households' disposable income growth picked up in the October-December quarter from the previous quarter, brightening prospects for private consumption.
Aitken's comments came during the IMF's yearly visit to South Korea to discuss economic developments and policies.
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