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Seoul should brace for end of global credit easing: BOK

Jan. 18, 2013 - 19:38 By Korea Herald
South Korea’s top central banker said Friday that the country should brace for the possibility that major central banks may end their march toward credit easing.

“It does not seem that the financial crisis will further worsen. There is a chance that major central banks may unwind their drives for quantitative easing,” Bank of Korea (BOK) Gov. Kim Choong-soo said in a monthly meeting with local bank heads.

Major central banks including the U.S. and Japan have launched a massive bond-buying program to prop up their fragile economies.

Cheap money is flowing into high-yield assets in Asia, making their currencies stronger.

But some members of the Federal Reserve’s rate-setting body said it would probably be appropriate to slow or to stop bond purchases well before the end of 2013, according to the minutes from the Fed’s December policy meeting. The minutes surprised the market as talks about a possible end to the program made investors jittery.

Following the BOK chief’s remarks, bond futures declined as market players interpreted them as an indication that he has a better-than-expected assessment of the U.S. economy.

Meanwhile, the governor also urged local banks to actively help the won-yuan currency swap line being used for trade settlement.

Korea and China agreed to use the existing bilateral currency swap line of 360 billion yuan (US$57.8 billion) to boost trade settlement in the two countries’ currencies.

The BOK said that starting next week, it will lend money to commercial banks so that local firms will be able to use the funds for trade settlement with Chinese firms. (Yonhap News)