South Korea Preparing To Control Their Exchange

South Korea was poised to take control of foreign exchange. One of these steps is to tax financial transactions to tackle currency speculation in Asia, especially Japan. South Koreans increasingly worried weaker yen prompted investors to pull out of the country's ginseng.

However, until the threat was carried out, other Asian countries are likely muted response to the devaluation of the yen. They just did a series of currency intervention in the stage light.

However, South Korea received a warning from sell in stock exchange that hit this week. Foreign investors recorded the biggest stock sales in the last 16 months in the South Korean market. As a result, the won fell to its lowest level in three months.

South Korea face greater risks of selling shares if foreign exchange control policy works. Next effect is further weakening won

"Korea will be the first domino, and the domino effect it is actually a risk of weakening the yen," said Rob Ryan, currency strategist at RBS and rates. South Korea's foreign exchange control risk will be the start of competition in the Asian currencies.

South anxiety over yen

Concerns over competitive currency devaluations as a result of the recent easing of monetary policy taken many developed countries, including the United States with a strategy of quantitative easing.

But now the focus of attention shifted to Japan. The yen has fallen nearly 12% against the U.S. dollar since mid-November 2012. In fact, once, the yen is the currency whose value is likely due to the action of strong Japanese carry trade investors.

Yen continues to slide along with the efforts of the Bank of Japan and Japan's new government to remove the cherry country out of recession and deflation. Last week, the BOJ doubled the rise in the inflation target of 2% and is committed to purchase financial assets from the market indefinitely.

So far, South Korea became the most vocal on policy concerning the yen. This is understandable because the South Korean exporters face to face with Japanese exporters.

Eroded the competitiveness of Korean exporters because of the weak yen has made Japanese electronics and automotive products so much cheaper. Because the value of the won has strengthened against the yen. In the last six months, the won rose from 15 won per yen to 11.8 won per yen.

As a result, at the beginning of this week the South Korean government to act. "The current policy of quantitative easing has led to unexpected situations and it is important (for the affected countries) to adopt a paradigm shift to overcome," said South Korean Deputy Finance Minister Choi Jung-Ku.

Among other things, the Government of South Korean government will ask the company not to borrow funds abroad. "The government will also tighten rules on foreign exchange derivatives trading banks to reduce volatility in the foreign exchange market," Choi said.

More extreme, South Korea, which previously opposed the taxation of financial transactions discourse aka Tobin Tax being debated in Europe, has now changed position. South Korean government said it would consider measures like Tobin Tax if won more intense speculation over.