Foreign Currency Loans Allowed for Facility Investments in South Korea

The won was trading at a 15-year low when South Korea's financial regulators announced they will relax foreign exchange rules to encourage liquidity in the currency market.

In a joint statement with the central bank and regulatory bodies, the finance minister stated, "Strict regulations restrain the efficiency of foreign exchange management, and there is a need to take into account worsened foreign exchange liquidity conditions after recent events."

Due to internal instability in politics and risk aversion after the U.S. Federal Reserve's cautious stance on further interest rate decreases, the South Korean won fell to its lowest level in 15 years.

As per the sources, the cap on foreign exchange futures contracts will be increased from the existing 50 percent and 250 percent of capital holdings for local banks and foreign bank branches in Seoul, respectively, to 75 percent and 375 percent.

Allowing businesses to borrow money in foreign currencies and convert it into won is another measure, provided that the money is utilized for investments in facilities like equipment, real estate, and land acquisitions.

After assessing the results, the ministry promised to expedite the implementation of the measures and explore their expansion.