By Cynthia Kim and Yena Park
SEOUL, July 2 (Reuters) - South Korea's vice finance chief on Thursday said Seoul is closely communicating with Japan and other key allies on foreign exchange issues, and warned that the won has become significantly misaligned relative to economic fundamentals.
"We are always working closely with Japan and other relevant countries and exchanging information very closely," Huh Chang - who is one of two vice finance ministers and is in charge of forex matters - said when
asked in a news conference if Seoul could be involved in any joint policies with Tokyo to stabilize currency markets. "The won is currently misaligned compared to the economy's fundamentals."
Speaking just days ahead of Monday’s historic shift to a 24-hour dollar-won trading cycle, Huh declined to elaborate further on any potential interventions, but added that the government is ready to deploy measures to stabilize the dollar-won market should pockets of illiquidity lead to excessive price swings.
Huh's warning on the won comes as the currency languishes near a 17-year low against the dollar, and shortly after reports surfaced that Japanese officials are shifting towards untargeted, aggressive tactics to squeeze speculators shorting the battered yen, which is hovering near four-decade lows.
A slumping won has become a persistent headache for Seoul, with the currency down 7.4% against the greenback this year, creating a stark divergence from local equities, where the benchmark KOSPI index has surged around 85%.
Deputy finance minister Moon Ji-sung, who was also present at the news conference, said Seoul has been maintaining communication channels with Tokyo and Washington regarding forex matters.
Moon added that the government expects forex trading volumes from the offshore non-deliverable forward (NDF) market to move towards the onshore spot market as onshore trading hours are extended.
"We are reviewing measures to encourage that," Moon said.
(Reporting by Cynthia Kim; Editing by Kevin Buckland)
