January 4, 2018 / 2:12 AM / 6 months ago

UPDATE 1-S.Korea cenbank chief says will respond if "herd behavior" seen in fx market

* Stance on currency unchanged; will respect market moves - governor

* S.Korean won peaked to over 3-yr high on Tuesday

* BOK’s monetary policy isn’t decided by fx rate alone (adds background, details)

By Cynthia Kim and Dahee Kim

SEOUL, Jan 4 (Reuters) - South Korean authorities will respond if “herd behavior” causes big moves in the won, but would otherwise leave the exchange rate to market forces, the central bank head said on Thursday after the currency struck a more than a three-year high earlier in the week.

“The stance on currency has not changed - we will respect that the market moves on supply and demand, but the Finance Ministry and the Bank of Korea will stick to our principle, which is to take active steps when herd behavior is seen,” Governor Lee Ju-yeol told reporters.

He was speaking on the sidelines of a meeting with Finance Minister Kim Dong-yeon.

The won rose 12.8 percent against the dollar last year, and on Wednesday people familiar with the matter told Reuters that authorities look at ways to direct capital flows in case the currency, which touched more than a three-year high on Tuesday, continued to soar.

Lee said the exchange rate was not the sole deciding factor, when asked whether the won’s current strength would affect monetary policy.

During Thursday’s meeting, the two policymakers agreed to employ fiscal and monetary policy harmoniously to sustain the growth rate in Asia’s fourth largest economy while also aiming for financial market stability.

They vowed to closely monitor existing downside risks such as household debt and housing market issues, and take actions together at the right time if needed. (Reporting by Dahee Kim, Cynthia Kim,; Editing by Simon Cameron-Moore)

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