South Korea strongly protested to British economic daily newspaper Financial Times for accusing the state as a currency manipulator to pose as worse offenders to Washington than Beijing and Tokyo, officials said Thursday.

The letter jointly signed by the Ministry of Strategy and Finance and the Bank of Korea on Wednesday retorted to details of the report and asked the paper to be “prudent”, they said. It is unclear whether the government required correction.

Seoul authorities’ atypical response to a foreign media report comes amid growing jitters in the market about the possibility of the country being bundled up with China as a currency manipulator in the next U.S. Treasury Department’s foreign exchange report in April.

Korea was cited on the currency watch list along with other countries raking in sizable surpluses with the U.S. in trade like China, Germany, Japan and Taiwan, after the last review in October. It met two of the three criteria - bilateral trade surplus of more than $20 billion and a current-account surplus exceeding 3 percent of the gross domestic product. It avoided the manipulator designation that leads to punitive actions from Washington because its purchase of foreign currency had been less than 2 percent of the GDP.

In the article titled "Donald Trump`s anger at Asian currency manipulators missed target", the FT said that South Korea and Taiwan and, in some respects, Singapore are the "obvious culprits" of currency manipulation.

The newspaper quoted Brad Setser, senior fellow at the Council on Foreign Relations, and a Treasury economist during the Obama administration, stating “The only ones I know that have been constantly active in trying to keep their currencies from appreciating are Korea and Taiwan.”

The Korean government categorically denied the two allegations by the paper.

In the letter, the government stressed that it has not intervened in the foreign exchange market to weaken the Korean currency citing reports from the International Monetary Fund (IMF) and the U.S. government.

A big trade surplus cannot be argued as an outcome of devalued currency as it owes more to cheap oil prices and depressed domestic demand from slow economy and demographic factors from fast aging society, it reportedly claimed.

The government also cited the Bank for International Settlements’ report that says the real value of the Korean won remains overvalued. Moreover, Korea’s deficit in the service trade with the U.S. has been widening.

Seoul has been taking a series of actions to win favor with Washington under openly protectionist policy of President Donald Trump such as increasing imports of U.S. shale gas and encouraging companies to up investment and hiring in the U.S.

The dollar rose 1.50 won to close Thursday at 1,142.50 won. The won has significantly weakened from 1,207.7 won in December due to high demand for dollar on expectations for heavy infrastructure spending and fiscal expansion under Trump and faster-than-expected pace in interest rate hikes. Investors have also dumped Asian currencies after Trump singled out China and Japan for undervaluing their currencies.

By Kim Gyu-sik

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