Won Hits 10-Year High Against Yen
By Lee Hyo-sik
Staff Reporter
The won rose to a 10-year high against the yen on Thursday as the Japanese central bank is projected to keep its key interest rate at the current 0.5 percent for the time being amid a slower-than-expected recovery in the world's second largest economy.
Keeping the yen weak against major currencies are a series of recent interest rate hikes by the European Central Bank and rising inflationary pressure in the U.S., analysts said. Rises in the flow of dollars for investment in stocks weakened the dollar and this further undermined sentiment in the yen, they said.
The won closed at 757.10 won to 100 yen in the local foreign exchange market, the highest level since Oct. 16, 1997 when it closed at 754.80 won. The won strengthened against the U.S. dollar, closing at 929.9 won against the greenback from 931.5 won the previous session. On the main stock market, the benchmark KOSPI closed up 47.19 points, or 2.74 percent, at a record high of 1,769.18.
Most analysts expect the yen to continue to remain weak against the won and other currencies until the Japanese economy shows signs of a visible rebound, cautioning that the weak yen is hitting Korean exporters hard as their products have become more expensive in overseas markets, compared to Japanese goods.
The falling yen is also weakening the price competitiveness of Korean goods on the Japanese market, widening the country's trade deficit against Japan. But a cheap yen is a bonanza for Korean travelers to the neighboring country.
Shin Min-yong, senior economist at LG Economic Research Institute, said Korean exporters have been losing market shares fast to their Japanese rivals in sectors where the two countries are in fierce competition, such as the automobile, electronic and semiconductor markets.
``The European Central Bank raised its benchmark interest rate eight times since December 2005 and the U.S. Federal Reserve has hinted at the possibility that it may raise its call rate to counter rising inflationary pressure. But the Bank of Japan is widely expected to leave the key rate unchanged at the current level at its policy meeting tomorrow amid the slower economic recovery,'' he said.
Shin said the yen has and will continue to remain weak for the foreseeable future. ``But, in longer terms, the yen will likely strengthen because Japan will eventually revalue its currency.''