Korean Won Gains Most Among Major Currencies
By Yoon Ja-young
Staff Reporter
The Korean won has marked the biggest appreciation against the dollar among major currencies around the world so far this year. As the strong won eats into profitability of exporters and suppresses inflation, the central bank is expected to refrain from any key rate raise for the time being.
The local currency closed at 1123.6 won per dollar, Tuesday, gaining 40.9 won, or 3.5 percent, from 1,164.5 won at the end of the last year.
According to the Bank of Korea, the won marked biggest appreciation among 21 major currencies around the world. The Australian and Canadian dollars also strengthened against the greenback.
Japanese yen, meanwhile, depreciated by 0.11 percent, as the British pound, Chinese yuan and Hong Kong dollar also weakened against the greenback.
``The Korea won and Australian dollar saw the biggest appreciation this year. They are also seeing rapid decrease of CDS premiums,'' said Lee Jin-woo, a strategist at Mirae Asset Securities. He explained that global liquidity is moving to countries were appreciation was more likely.
``The preference for safety assets decreased upon the rebound in stock markets, pulling down the value of the U.S. dollar last year,'' said Lee Il-hoon, a market analyst at Meritz Securities.
He added that arbitrage trade between the yen, dollar, and won upon the rising yen/dollar rate, and foreigners' buying of Seoul shares were adding to the sell-off pressure on the greenback.
The current account surplus and optimistic outlook for the Korean economy is also making global players bet against the dollar.
The steep gaining of the local currency could affect the central bank's decision on a key rate hike in either February or March.
However, the bank of Korea may delay the raise as it could negatively affect local businesses which have lost price competitiveness due to the strong local currency.
The strong won will also decrease the risk of inflation.