Direct Dealing
Bank of Korea governor candidate Lee Ju-yeol showed a positive stance on direct transactions between the Korean won and Chinese yuan. He also mentioned the possibility of the introduction of forward guidance like that of the United States.
“I am planning to set up a direct dealing market from the very foundation,” the candidate said on March 19 at the National Assembly confirmation hearing, adding, “Home currency-based payment has been found to be the most effective way of dealing with a financial crisis, and I will take care during the course of the process to not repeat the mistakes of the won-yen market.” He continued to say, “The yuan has not become an international currency because of systemic problems on the part of China, and I think that the direct dealing will be an even better option once the problems are dealt with.”
He is going to bring in the forward guidance that is in practice in the United States, too. It can be defined as providing information as to the future policy of a central bank on a running basis. It is effective in boosting the policy predictability for market participants.
“Although environments and conditions are different between Korea and the US, we need to look into the necessity of the forward guidance as notable means of communication,” he explained.