By Se Young Lee and Kitiphong Thaichareon
SEOUL/BANGKOK, Jan 30 (Reuters) - South Korea warned on
Wednesday it might consider a tax on financial transactions and
Thailand said it was worried its strong currency would hurt
exporters as moves by advanced economies to flood markets with
easy money increasingly spill over into other countries.
Government officials in two of the four Asian tiger
economies, which fell victim to massive outflows of speculative
money in the late 1990s, expressed concerns over the negative
impacts of super-loose monetary policy just two weeks before a
Group of 20 finance chiefs' meeting in Moscow.
Policymakers in advanced countries, particularly Japan and
the United States, have been acting aggressively to print more
money and reflate their economies since the global financial
This has had the effect of weakening their currencies while
strengthening those of many other countries from South Korea to
Mexico, making their exports less competitive, roiling their
financial markets and threatening to feed destabilising asset
"The external environment and foreign exchange market
movements since the fourth quarter of 2012 have created a
considerably worrying situation," South Korean Deputy Finance
Minister Choi Jong-ku told a seminar in Seoul.
"The recent wave of quantitative easing policies has created
an unprecedented situation and makes it necessary (for affected
countries) to adopt a paradigm shift in response," Choi said.
The South Korean government will tell state-controlled firms
to refrain from borrowing abroad and will further tighten rules
on banks' currency derivatives trading to ease volatility in
foreign exchange markets, Choi said.
Seoul was opposed to imposing an outright levy on financial
transactions such as the Tobin tax being debated in Europe, but
would consider similar measures should speculation in the won
currency intensify over time, he added.
Such a tax could discourage speculation but might also
reduce normal investment, possibly even causing foreign
investors to flee a market en masse.
In Bangkok, Finance Minister Kittirat Na Ranong told
reporters that Prime Minister Yingluck Shinawatra was worried
about the fallout from advanced economies' easy money policies
and has ordered policymakers to discuss ways to deal with it.
He said authorities will use normal financial measures to
manage flows of money into and out of the country but added
there were no plans to use capital controls or
The Thai baht is hovering near a 17-month high and has risen
close to 3 percent against the U.S. dollar so far this year.
Talk about a currency war, or competitive devaluation of
currencies aimed at giving exporters an upper hand in pricing
goods abroad, dominated discussions at the World Economic Forum
in Davos last week, with many central bankers and business
executives questioning the wisdom of such money policy.
German Chancellor Angela Merkel last week singled out Japan
as a source of concern following recent moves by its central
bank to quicken the pace of money-printing.
Authorities in Thailand, South Korea, Taiwan and the
Philippines have repeatedly intervened in foreign exchange
markets in recent months to try to slow the advance of their
currencies, which they fear could jeopardise their expected
Latin American policymakers have also been bolstering their
Colombia cut interest rates this month and said it would ramp
up dollar purchases, Peru plans to pre-pay up to $1.5 billion in
foreign debt this year and is intervening aggressively to curb
currency gains, and Mexico is considering an interest rate cut
that some economists believe reflects as much a desire for a
weaker peso as it does concerns about growth.
"I sincerely hope other countries do not get into
competitive depreciation of their currencies," Indian Finance
Minister Palaniapan Chidambaram told Reuters Television in
London on Tuesday.
Chidambaram said it was too early to say Japan's latest
round of policy easing earlier this month constituted a currency
war but expressed strong concerns about such a scenario.
"It will hurt us very badly. Our exports are down this year
compared to last year because of the global situation...If
(there is currency war), our exports will suffer even more."
Japanese Prime Minister Shinzo Abe, whose campaign for
unlimited money printing has sent the yen plunging, waded into
the growing global debate about currency wars for the first time
on Wednesday, shrugging off such criticism.
The yen fell 10 percent against the dollar in the
final quarter of 2012 alone, its sharpest quarterly loss in 17
years, on expectations the BOJ and a new government would launch
This dealt an especially heavy blow to export-dependent
economies in the region such as South Korea and Thailand as
their currencies were firming against the dollar.
As a result, the value of the South Korean won and Thai baht
against the yen surged 16.5 percent and 12.1 percent,
respectively, in the fourth quarter, marking their biggest
quarterly gains in nearly 15 years, Thomson Reuters data shows.
"I don't think Japan or any specific country will be singled
out (at the G20 finance chiefs' meeting), but obviously this is
among the top issues taking place in the financial markets and
therefore will likely be discussed," a G20 negotiator from an
Asian country told Reuters recently.
G20 leaders agreed at a summit in Seoul in 2010 to avoid
waging competitive currency devaluation and instead to make
efforts to ease the current account imbalances identified as one
of the causes behind the global financial instability.