By Kim Hyun-cheol
Staff Reporter

A private research institute warned Monday of the continuing appreciation of the Korean won, urging the government to come up with measures to mitigate its possible negative impacts. It said the won-dollar exchange rate is nearing a break-even point (BEP) for local exporters.

In a survey of local listed firms through the second quarter, the BEP exchange rate stood at 1,133 won per dollar, according to a report by Samsung Economic Research Institute (SERI). Companies will start to lose money when they export their products if the rate goes below the BEP on the real market.

Peaking at 1,570 won in March, the dollar's value against the won has constantly been on a downward spiral this year. The rate stood at 1,155.7 won per greenback on Monday's currency market.

By analyzing the tendency of BEP rates in different local industries, the report concluded that Korean companies are more vulnerable to the stronger won than before.

"BEP exchange rates are set higher in general from a year earlier, and that shows exporters here are now weaker in profitability," SERI's senior researcher Jeong Young-sik said.

The chemical industry is the most immune to the fluctuations of the exchange rate, while machinery is the most vulnerable, the report said. The BEP rates were tallied at 1,086 won for chemical firms, and 1,145 won for machinery manufacturers.

The current won appreciation is not as intense as it has been in the past few years before the global financial crisis, but Korean industries need to brace themselves for possible economic impacts because the economic circumstances are likely to worsen next year, Jeong said.
With lower growth across the world, Korea's dependency on overseas trade is expected to be stronger while commodity prices, including those of crude oil, are forecast to remain high.

The rising won value is a deterrent to economic growth. A 10-percent rise in the won-dollar rates causes a 1.13-percent contraction in the country's growth, and the fall reaches 1.52 percent when raw material prices go up 10 percent on international markets, according to the report.

It also requested the government work on a series of overhauls in foreign currency policies, including improvement of market infrastructure and strengthened supervision on foreign speculative funds, what is often dubbed "hot money."

Companies will be better off with a rationalized structure in management and governance, SERI added.

An earlier report forecast exports of the nation's top 30 conglomerates will drop by 5.7 trillion won ($4.9 billion) in the fourth quarter if the rate falls to 1,170 won per dollar.

A fall of 10 won in the rate would cause a decrease of 2.6 percent in Korean exports, which would lead to a decline in their competitiveness, the Federation of Korean Industries, the nation's largest business lobby, said last month.

hckim@koreatimes.co.kr