By Kim Tae-gyu
Staff Reporter
The Korean currency is continuing to gain ground against the greenback with the won-dollar exchange rate finishing below the psychologically-significant 1,150 won mark for the first time in 15 months.
The rate ended at 1,140 won per dollar Tuesday, down 1.2 percent from its previous close. This is the first time that the Korean won has fallen below the 1,150 won plateau since August 2008.
``With the United States keeping its key interest rate at zero, investors have incentives to sell dollars to buy other currencies. This leads to a weak dollar and the resultant strong won,'' Woori Investment & Securities economist Lawrence Kim said.
``The downward trend is expected to continue for the time being so the rate could move into the vicinity of 1,100 won unless the Seoul administration intervenes in the market.''
When necessary, the government has channeled dollars into the market in a so-called smoothing operation. But it has not funneled them en masse in order to keep the won artificially weak.
Overseas investment banks are more aggressive in predicting the won-dollar rate for this year. JP Morgan projects that the won will appreciate to 1050 won in late 2010.
This is not good news for Korean exporters such as Samsung Electronics or Hyundai Motor, which would see the dollar-denominated prices of their products rise.
``Outbound shipments will be negatively affected due to the strong won and the current account surplus is expected to substantially shrink throughout the year,'' Kim said.
``In consideration of the global trend of the dollar losing its value, however, local companies should have set up strategies to cope while embracing the low won-dollar exchange rate,'' he added.
Korean corporations chalked up a fast increase in their overseas sales last year thanks to the weak won. As a result, Asia's fourth-largest economy recorded a current account surplus of more than $40 billion in 2009.
But the figure is expected to starkly diminish this year as the won gains against the greenback.
``The market consensus seems to be that the won is still undervalued even though it has appreciated too much of late,'' a Seoul analyst said.
The won-dollar rate once approached 1,600 won per dollar in March last year, but remained upside of the 1,200 won level for most of 2009, plummeting below it in December.
The benchmark KOSPI failed to breach the 1,700 mark, ending at 1,692.54, down 3.6 points from the previous close. The tech-heavy KOSDAQ rose by 5.07 points to finish at 533.26.