South Korea's finance minister said on Friday the government was not seeking to undervalue the won to support exports, signalling authorities may be loosening a policy of holding the currency down.
"The government will not intentionally undervalue the currency to support the exports," Minister Lee Hun-jai told a weekly news conference. The comments showed a marked contrast to earlier comments, when he said authorities would not allow the won to appreciate.
Dealers said the remarks indicated a change in Lee's approach to foreign exchange policy after criticism from economists and dealers that an undervalued won was partly responsible for a prolonged slump in domestic spending.
"It is too early for us to believe for sure that the government's policy has now changed, but clearly the remarks show some change," said a currency dealer at a foreign bank. "Still I would like to see how officials directly in charge of intervention operations behave."
Finance ministry officials said Choi Joong-kyung, chief of the ministry's international finance bureau and the most influential foreign exchange official, had cancelled a planned news conference set for Friday because it clashed with the finance minister's news conference.
South Korea's economy, the third largest in Asia, has been on a tentative recovery path driven by exports since falling into a brief recession in early last year, but stubborn weakness in consumption and investment remains a concern for policy makers.
The won has gained 2.4 percent so far this year against the dollar, whereas the Japanese yen has dropped by more than 2 percent - leaving the won nearly 5 percent higher against the yen.
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