SEOUL (Reuters) – South Korea’s financial authorities said on Friday they would ease foreign exchange regulations to improve liquidity conditions in the currency market, as the won traded at a 15-year low.
“Strict regulations limit the efficiency of foreign exchange management, and there is a need to take into account the deterioration in foreign exchange liquidity conditions following recent events,” the Ministry of Finance said in a joint statement with the central bank and regulators.
The South Korean won fell on Thursday to its weakest level in 15 years, weighed down by risk-off sentiment following the US Federal Reserve’s dovish stance on further interest rate cuts as well as domestic political uncertainty.
According to the statement, the ceiling on foreign exchange futures contracts will be raised to 75% of the capital holdings of local banks and 375% of the Seoul branches of foreign banks, from the current 50% and 250%, respectively.
The measures also include allowing companies to obtain foreign currency loans and exchange funds for won, if they are used to invest in facilities such as purchasing equipment, real estate and land.
The ministry said that it will implement the measures quickly and consider expanding them after reviewing their effects.
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