By Choi Kyong-ae
The won's recent jump in value against the dollar will have a limited impact on Korea's exports and the national economy, currency analysts said Thursday.
On Wednesday, the U.S. dollar finished at 1,041.4 won, the highest level in five years and eight months. Robust exports of smartphones and solid economic fundamentals helped push up the value of the Korean currency, data from Samsung Futures showed.
"As Korea's major manufacturers such as Samsung Electronics and Hyundai Motor have increased their overseas production, they are today less exposed to currency swings as they were in the past," Samsung Futures foreign-exchange analyst Jeon Seung-ji said by telephone.
Currently, Samsung produces more than 70 percent of its cellphones outside of Korea. Hyundai makes more than 50 percent of its vehicles overseas.
Woori Futures currency analyst Son Eun-jung said that lower import prices of raw materials could help major exporters offset a decline in dollar-denominated profits earned overseas when converted into the local currency.
The Korean government has intervened in the foreign-exchange market to stem the won's rapid appreciation against the dollar. The move helped the won stay above the 1,050 won level from Aug. 20 2008 until Wednesday. On Aug. 20, the dollar ended at 1,049.25 won. A lower number represents a stronger won.
On Thursday, a day after the won's sharp gain, government officials said the ongoing volatility was not desirable and they will keep a close eye on currency movement.
"It is not good for the economy if the exchange rates move in this volatile way over a short period of time. So we will be closely monitoring capital flow by foreigners and overall transactions in the markets," Choi Hee-nam, director general of the International Finance Bureau at the Ministry of Strategy and Finance, said in a text message.
Choi's message was echoed by Bank of Korea Governor Lee Ju-yeol. Their remarks helped the dollar close at 1,040.2 won later Thursday after falling to 1,031.4 won during the earlier part of trading.
But analysts said it was unexpected that the Bank of Korea allowed such a drastic jump in the value of the won. They said pressure from the U.S. made the central bank remain temporarily inactive.
"In its recent foreign-exchange report, the U.S. government urged Korea to seek growth less based on exports and the depreciation of the won against major currencies, which include the dollar," Son at Woori Futures said.
Whether the won continues to rise depends on the "attitude of the Seoul authorities" and the dollar's weakness going forward, she said. The dollar currently remains weak despite the continued U.S. bond-buying programs.
Driven by investors' growing appetite for riskier assets in emerging markets, the dollar is likely to continue to fall against the won for the time being, analysts said. But they didn't expect the dollar to fall below 1,000 won on increasing investments in overseas assets.
Meanwhile, the broader KOSPI index ended at 2008.61 Thursday, up 0.48 percent from a session earlier. It broke the 2000 level for the first time in 100 days since Dec. 30 when the benchmark index closed at 2011.34.
Foreigners continued to buy domestic stocks valued at 1.14 trillion won from March 26 through April 8, giving a boost to the index, Jeon said.
The won's recent jump in value against the dollar will have a limited impact on Korea's exports and the national economy, currency analysts said Thursday.
On Wednesday, the U.S. dollar finished at 1,041.4 won, the highest level in five years and eight months. Robust exports of smartphones and solid economic fundamentals helped push up the value of the Korean currency, data from Samsung Futures showed.
"As Korea's major manufacturers such as Samsung Electronics and Hyundai Motor have increased their overseas production, they are today less exposed to currency swings as they were in the past," Samsung Futures foreign-exchange analyst Jeon Seung-ji said by telephone.
Currently, Samsung produces more than 70 percent of its cellphones outside of Korea. Hyundai makes more than 50 percent of its vehicles overseas.
Woori Futures currency analyst Son Eun-jung said that lower import prices of raw materials could help major exporters offset a decline in dollar-denominated profits earned overseas when converted into the local currency.
The Korean government has intervened in the foreign-exchange market to stem the won's rapid appreciation against the dollar. The move helped the won stay above the 1,050 won level from Aug. 20 2008 until Wednesday. On Aug. 20, the dollar ended at 1,049.25 won. A lower number represents a stronger won.
On Thursday, a day after the won's sharp gain, government officials said the ongoing volatility was not desirable and they will keep a close eye on currency movement.
"It is not good for the economy if the exchange rates move in this volatile way over a short period of time. So we will be closely monitoring capital flow by foreigners and overall transactions in the markets," Choi Hee-nam, director general of the International Finance Bureau at the Ministry of Strategy and Finance, said in a text message.
Choi's message was echoed by Bank of Korea Governor Lee Ju-yeol. Their remarks helped the dollar close at 1,040.2 won later Thursday after falling to 1,031.4 won during the earlier part of trading.
But analysts said it was unexpected that the Bank of Korea allowed such a drastic jump in the value of the won. They said pressure from the U.S. made the central bank remain temporarily inactive.
"In its recent foreign-exchange report, the U.S. government urged Korea to seek growth less based on exports and the depreciation of the won against major currencies, which include the dollar," Son at Woori Futures said.
Whether the won continues to rise depends on the "attitude of the Seoul authorities" and the dollar's weakness going forward, she said. The dollar currently remains weak despite the continued U.S. bond-buying programs.
Driven by investors' growing appetite for riskier assets in emerging markets, the dollar is likely to continue to fall against the won for the time being, analysts said. But they didn't expect the dollar to fall below 1,000 won on increasing investments in overseas assets.
Meanwhile, the broader KOSPI index ended at 2008.61 Thursday, up 0.48 percent from a session earlier. It broke the 2000 level for the first time in 100 days since Dec. 30 when the benchmark index closed at 2011.34.
Foreigners continued to buy domestic stocks valued at 1.14 trillion won from March 26 through April 8, giving a boost to the index, Jeon said.
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