Yellen and Korean leaders agree to stabilize currency market

U.S. Treasury Secretary Janet Yellen met with the president, the finance minister, and the governor of the central bank during her two-day visit to Korea.

While the visit came at a time of economic turmoil, with financial markets volatile, inflation raging and economies sputtering, Yellen steered clear of mentioning specifics, and no major agreements seem to have been reached.  

She stuck to the script and maintained the broad-theme approach adopted by the U.S. to date. The elephant in the room — whether the United States and Korea would adopt a swaps agreement — was carefully avoided.  

On Tuesday, she reaffirmed the Korea-U.S. alliance with President Yoon Suk-yeol and stressed economic relationships with Bank of Korea Gov. Rhee Chang-yong and Finance Minister Choo Kyung-ho.

It’s “our honor and pleasure to discuss the partnership between Korea and the United States,” Yellen, a former central banker herself, said before a private meeting with Rhee at the central bank in central Seoul. “We share many values and common economic relationships.”

Discussions held between Rhee and Yellen were not disclosed, but the two were scheduled to discuss the global economy, financial markets and cooperation on economic policies, the Bank of Korea said.  

In her meeting with Choo, the two agreed to cooperate in stabilizing the foreign exchange market, although no currency swap agreement was made.  

According to the Korean Finance Ministry on Tuesday, one of the key issues discussed between the two governments was the volatile foreign exchange market.  

Choo and Yellen agreed that both countries “have the ability to implement various cooperative actions such as liquidity facilities if necessary.”  

Earlier in the day, Yoon asked Yellen to have an in-depth discussion with Choo about the currency market.  

Yellen arrived in Korea only two months after U.S. President Joe Biden visited Korea to reaffirm the key alliance between the two countries, and less than a week since a brief meeting with Choo during the G20 finance leader meeting in Bali last week.  

This is Yellen’s first visit as the U.S. Treasury Secretary. Former U.S. Treasury Secretary Jacob Lew met Korea’s central banker in Korea in 2016.

The won has been falling against the dollar this year due to market uncertainties related to the Russia-Ukraine war and the Fed’s hawkish monetary policies. The Korean currency reached a 13-year low last week.

It traded at 1313.40 won, up 0.30 percent, when the market closed on Tuesday.

Korea’s foreign reserves have been declining rapidly, down 2.1 percent to $438.28 billion in June. It was the steepest decrease since November 2008.  

On Tuesday, Yellen did not reply to questions from the Korean press about the chances of Korea and the U.S. signing a currency swap. Whether the issue was brought up during talks with the leaders also was not disclosed.  

Korea had a currency swap deal with the United States from March 2020 to the last day of 2021. A new arrangement was a possible agenda item when U.S. President Joe Biden visited Korea in May, but no agreement was announced.  

Yellen also paid a visit to LG Science Park in western Seoul on the same day. She toured the facilities before having a private talk with LG Chem CEO Shin Hak-cheol.

She inquired about LG Chem’s battery business, including the recyclability of the battery materials and the amount of lithium and anode material included in a battery, according to LG Chem.

LG Chem is the only company Yellen is scheduled to visit during the trip. LG Energy Solution, a battery-making subsidiary of LG Chem, announced in April plans to build a $1.4 billion battery plant in Arizona.  

“We cannot allow countries like China to use their market position in key raw materials, technologies, or products to disrupt our economy or exercise unwanted geopolitical leverage,” Yellen said in remarks prepared for delivery Monday, according to a report from AP. China “has directed significant resources to seek a dominant position in the manufacturing of certain advanced technologies, including semiconductors while emplying a range of unfair trade practices to achieve this position.”

Yellen has brought up “friend-shoring” in her past speeches. With friend-shoring, production is brought from less-friendly nations to more friendly nations and allies.  

LG Energy Solution was the No. 2 EV battery maker in the world, with 14.4 percent of the global market, in the January-May period, according to data from SNE Research, after China’s CATL, which had 33.9 percent.  

BY JIN MIN-JI [jin.minji@joongang.co.kr]