South Korea investigate forex trading positions
South Korea sought had some problems with speculative currency inflows the latest year, making the local currency to spike. Now, an investigations of the major banks and their forex positions will start, according to Korean Ministry of Strategy and Finance.
What kind of forex trading will be investigated?
We will put our focus on forex forwards, forex futures and forex derivate instruments. No investigation will be made for online forex trading, according to the South Korean ministry.
Purpose of the investigation?
The investigation aim to prevent excessive short term foreign currency loans, and offshore borrowing. South Korea is the 4th largest economy in Asia, and excessive capital inflow may lead to financial instability and slower recovery from the economic slowdown we seen the last years.
The Bank of Korea will be working together with Financial Supervisory Service, who aims to maintain a sound credit order, fair financial practices, and maintain consumer protection.
The government will take “appropriate” actions, if any rules are violated or broken, the statement said.
How come fx traders see opportunities in Won?
Fx traders and foreign investors see South Korea as a leveraged play on the risk and opportunities in the Asian economies. Currency direction change of the won are often quick and can be over in few days.
Large forex positions are often built up and may cause excessive volatility, giving headaches for exporters and the entire financial sector.
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