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The euro is on a downwards slide after first French and then Dutch voters rejected the EU constitution. After tumbling to US$1.23 late last month, the lowest since last October, the European currency dropped to $1.2202 on Thursday. A weak euro also helped the dollar gain to W1,010 for the first time in 45 days.
Foreign exchange experts expect the euro to remain weak for the time being, saying the fact that it has been overvalued against the dollar burdened the European economy. Lee Jin-woo, a futures expert with the Federation of Agricultural Cooperatives, said that although the euro might experience a technical rebound, the overall trend was downward.
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EU Commission President Jose Manuel Barroso wipes away tears during a press conference at EU headquarters in Brussels, Belgium on Wednesday, after the Netherlands rejected a proposed constitution for the EU by a sweeping majority, following France.
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As expectations run high that a weak euro will help European businesses restore their export competitiveness, stock prices of European blue chips like DaimlerChrysler and Ericsson have also been on an upward trend.
What effect will a weak euro have on the Korean economy? Analysts put forward conflicting views. Some consider it unfavorable, while others see it as a neutral variable.
Pessimists think that a weak euro could discourage Korean exports to Europe, which have grown considerably for several years. Korea exported goods worth US$37.8 billion to Europe and earned US$14.3 billion in trade surplus last year. Major export items include cars, cell phones, ships and semiconductor chips, all of which grew at an annual rate of 50-120 percent. Kim Deuk-kap of the Samsung Economic Research Institute said Korea¡¯s export growth had been the most conspicuous in the European market recently, and a weak euro was an unfavorable factor for the Korean economy since it would hurt the profitability of exporters.
But on the positive side, Hyundai Motor said since Korean companies export more goods to the U.S. than to Europe, a weak euro-strong dollar trend could benefit them. Yoon Deok-yong of the Korean Institute for International Economic Policy said a weak euro could slow down the seemingly unstoppable appreciation of the won because it halted the global weakening of the dollar. A weaker won would therefore offset worsening profitability of Korean exporters caused by a weak euro, he said.
(englishnews@chosun.com )
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