Dec. 19 (Asia Today) -- The Bank of Korea said Thursday it will temporarily ease regulations and offer incentives to financial institutions in a bid to stabilize the foreign exchange market as the won continues to weaken against the U.S. dollar.
The central bank said it convened an emergency Monetary Policy Board meeting earlier in the day and decided to temporarily exempt the foreign exchange soundness levy from January through June next year. It will also pay interest on foreign currency reserve requirements during the same period.
The announcement comes as the won-dollar exchange rate has hovered at elevated levels, approaching 1,480 won per dollar.
The foreign exchange soundness levy, imposed under the Foreign Exchange Transactions Act, requires financial institutions to pay a levy when their foreign currency liabilities exceed a certain threshold. Temporarily exempting the levy is expected to lower foreign currency borrowing costs for banks, potentially increasing the supply of dollars and other foreign currencies in the domestic market.
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