KOSPI dips 1% to 1,939.88
By Na Jeong-ju
The Korean won has reached its strongest level in five years and nine months against the U.S. dollar, Wednesday.
The won closed 0.76 percent, or 7.8 won, higher at 1,022.5 won against the dollar, the strongest level since Aug. 7 in 2008 when the dollar ended at 1,016.5 won.
The won's gain reflects the dollar's weakness in global markets amid the deepening political crisis in Ukraine and falling yields of U.S. bonds, analysts say.
The benchmark Korea Composite Stock Price Index (KOSPI) also dropped 1 percent, or 19.56 points, to 1,939.88 due mainly to worries that the won's rise may pour cold water on Korea's exports. It's the first time since March 21 that the KOSPI has ended below 1,940.
Analysts cautiously predicted that the won may gain strength further because the crisis in Ukraine could continue for the time being.
"The won may move between 1,020 and 1,030 won against the greenback for the following few weeks," said Sohn Eun-jeong, an analyst at Woori Futures. "I think it's unlikely for the won to fall below 1,020 won because the government may attempt to keep the won's value through massive dollar buying programs."
Kim Yong-gu from Samsung Securities said the won's strength may remain as the biggest downside risk for the Korean economy until the dollar rebounds.
"The rapid rise of the won's value will dampen the price competitiveness of Korean exporters. This is worsening investor sentiment," Kim said. "We have to see how the global markets will respond to the Fed's chairwoman Janet Yellen's planned speech to Congress and the monetary meeting of the European Central Bank."
The growth of Korea's current account surplus is also fueling demand for the won.
The current account surplus reached $7.35 billion in March, the highest level in five months as exports of tech products, cars and chips gained ground, The current account is the broadest measure of cross-border trade.
The Korean won has recently advanced the most against the dollar among major currencies.
In April alone, the won strengthened 3.8 percent against the greenback, the biggest appreciation among the world's 40 major currencies.
Citing these factors, some pessimists have predicted that the Korean currency may fall below 1,000 won per dollar this year.
By Na Jeong-ju
 |
| Currency dealers watch monitors at a Korea Exchange Bank branch in Seoul, Wednesday. The won ended at 1,022.5 per dollar, the strongest it has been in five years and nine months. / Yonhap |
The won closed 0.76 percent, or 7.8 won, higher at 1,022.5 won against the dollar, the strongest level since Aug. 7 in 2008 when the dollar ended at 1,016.5 won.
The won's gain reflects the dollar's weakness in global markets amid the deepening political crisis in Ukraine and falling yields of U.S. bonds, analysts say.
The benchmark Korea Composite Stock Price Index (KOSPI) also dropped 1 percent, or 19.56 points, to 1,939.88 due mainly to worries that the won's rise may pour cold water on Korea's exports. It's the first time since March 21 that the KOSPI has ended below 1,940.
Analysts cautiously predicted that the won may gain strength further because the crisis in Ukraine could continue for the time being.
"The won may move between 1,020 and 1,030 won against the greenback for the following few weeks," said Sohn Eun-jeong, an analyst at Woori Futures. "I think it's unlikely for the won to fall below 1,020 won because the government may attempt to keep the won's value through massive dollar buying programs."
Kim Yong-gu from Samsung Securities said the won's strength may remain as the biggest downside risk for the Korean economy until the dollar rebounds.
"The rapid rise of the won's value will dampen the price competitiveness of Korean exporters. This is worsening investor sentiment," Kim said. "We have to see how the global markets will respond to the Fed's chairwoman Janet Yellen's planned speech to Congress and the monetary meeting of the European Central Bank."
The growth of Korea's current account surplus is also fueling demand for the won.
The current account surplus reached $7.35 billion in March, the highest level in five months as exports of tech products, cars and chips gained ground, The current account is the broadest measure of cross-border trade.
The Korean won has recently advanced the most against the dollar among major currencies.
In April alone, the won strengthened 3.8 percent against the greenback, the biggest appreciation among the world's 40 major currencies.
Citing these factors, some pessimists have predicted that the Korean currency may fall below 1,000 won per dollar this year.
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