FX.co ★ U.S., South Korea Agree Not to Target FX Rates for Competitive Gain

The United States and South Korea have agreed to limit foreign exchange interventions to managing "excess volatility," steering clear of using such measures to influence exchange rates for competitive gains, as per a joint statement issued on Wednesday. This agreement is similar to a recent U.S.-Japan accord but does not include the currency swap line that Seoul has been seeking to mitigate foreign exchange risks associated with its $350 billion investment commitment in the U.S., following a trade agreement in July. "The United States and the Republic of Korea reaffirmed their commitment under the IMF Articles of Agreement to refrain from exchange rate manipulation aimed at securing an unfair competitive edge," the statement declared. Additionally, both nations emphasized that "macroprudential or capital flow measures will not be directed at exchange rates," and interventions could be deemed "equally appropriate" in situations of both severe depreciation and appreciation. Discussions aimed at finalizing the July trade agreement, which had lowered U.S. tariffs on South Korean automobiles from 25% to 15%, have reached an impasse due to Seoul's concerns over foreign exchange issues.