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G20 to seek clarity on U.S. policy at July meet: South Korea

By Se Young Lee and Choonsik Yoo

SEOUL (Reuters) - South Korea along with other G20 members will seek clarity on the U.S. Federal Reserve's exit strategy on stimulus policy at the G20 ministerial meeting later this month, the country's finance minister told Reuters on Thursday.

"There will be discussions about how the U.S. will be unwinding (QE) if the U.S. economy does recover, as well as what the financial market impact will be when the unwinding takes place," Minister Oh-seok said in an interview.

He added South Korea would also raise the issue because if the unwinding causes troubles to emerging economies, that will in turn affect the U.S. economy in what he called a "reverse spillover" process.

Finance ministers and central bank chiefs from the Group of 20 advanced and major developing economies plan to hold a meeting in Russia on July 19-20.

South Korea and other Asian markets were recently hit by the prospects of the U.S. Federal Reserve starting to taper its massive bond-buying program later this year, with bond market yields rising sharply, stock markets tumbling and their respective currencies falling against the dollar.

Though South Korean policymakers say that the country's fundamentals are strong and that there was no surge in capital outflows despite concerns about the Fed's unwinding, they remain concerned about the cumulative effects of such policy in conjunction with other factors such as Japan's aggressive money-printing campaign.

"As the previous meeting when the matter of spillover effect was discussed, a G20 level message on how policy should be conducted with the overall global economy in mind and how timing of such policies can and should be adjusted based on such conditions is being considered," Hyun said.

The minister said there will be discussions at the G20 about the basis under which the Fed will start unwinding its monetary stimulus, how such tapering will be implemented and at what pace the central bank will start reducing its bond purchases.

(Editing by Kim Coghill)

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