Won Rises 6.8% Against Yen in 2nd Quarter
By Na Jeong-ju
Staff Reporter
The won gained 6.8 percent against the yen in the second quarter from a quarter ago, undermining competitiveness of South Korean exporters competing with Japanese rivals in overseas markets, the Bank of Korea said Monday.
The won closed at 748.7 won per 100 yen at the end of June, down 34.3 won from the end of last year, and 50.7 won from the end of March. Since the end of 2005, the won gained 12.5 percent against the yen until the end of June. The won closed at 756 per 100 yen Monday.
Meanwhile, the won's appreciation against the dollar showed signs of losing steam in the second quarter as the Korean currency rose 1.9 percent to 923.8 won per dollar. From the end of 2006, the won gained 0.6 percent against the greenback, compared to a 13.2 percent rise of the Thailand baht, a 7.5 percent gain of the Australian dollar and a 2.6 percent increase of the euro during the same period.
``In mid-May, the dollar gained its global strength as the won's value fell to 934.1 won on May 18,'' the bank said. ``However, the supply of dollar increased again on growing concerns about the sub-prime mortgage crisis in the United States and Korea's strong exports growth.''
South Korean officials think the won's recent gain against the yen and the dollar is too fast in view of its economic fundamentals and have taken measures to prevent the won from rising further.
The country saw $12.7 billion in trade deficit with Japan in the first five months of the year, up from $10.4 billion in the same period of last year.
Korea exported $10.5 billion worth of goods and services to Japan in the January-May period, down 0.6 percent from the same period last year. If the won's strength continues toward the end of the year, the country is expected to record a drop in its shipments to Japan for the first time since 2002 when it fell 8.3 percent from the previous year, according to the central bank.
On the other hand, Korea imported goods worth $23.2 billion from Japan in the Jan.-May period, up 10.5 percent from a year earlier, as the weak yen has made Japanese products cheaper to import.
``The won's strength is being reflected in the export prices of Korean products. The losses from the won's rise are so huge that many Korean firms don't make enough profits to cover export and labor costs,'' said Chung Moon-gun, an economist at Samsung Economic Research Institute.
Japan's apparent adherence to a weak yen and the so-called ``yen-carry-trade'' has boosted the supply of yen on global currency markets.
The Korean government has said it is watching the won's rise against the yen closely, but has not introduced any concrete measures to address it.
Currency dealers say that the won is projected to weaken gradually after rising to a mid-910 won range against the dollar.
``Many companies and individuals will likely expand investment overseas. Also, the strong currency has and will continue to encourage Koreans to travel overseas, taking some steam out of the won's strength,'' a dealer at Korea Exchange Bank said.