 |
A man walks past a bank's money exchange center in Seoul on Tuesday, when the won fell 1 percent against the dollar, setting near four-year lows for the third session in a row. /REUTERS
|
 |
|
The weakening of the Korean won against the U.S. dollar is beginning to be felt in people¡¯s pockets. After seeming to be firmly anchored in the W1,000 to W1,030 range against the dollar after massive government intervention last month, the won finished trading on Tuesday at W1,089.40 to the dollar, up W10.50 from the previous day¡¯s close. This was the lowest in the three years and nine months since it hit W1,090.30 on Nov. 16, 2004. At 9 a.m. on Wednesday, the won was trading at W1,091.00, up W1.60 from Tuesday.
As a result, customers have to pay W1,108.46 to buy a dollar and W1,100 per dollar when wiring money overseas. This was the first time the won hit the W1,100 per dollar level by the Korea Exchange Bank standard in almost four years. As a result, few people bought or remitted dollars.
¡ß Effects on pockets
Over the past month alone, the won weakened 7.8 percent against the dollar, 7.7 percent against the Chinese yuan and 5.6 percent against the Japanese yen. The won ranked third next to the Australian dollar and British pound in terms of the amount it weakened against the U.S. currency over the month.
Parents who sent their children to study in the United States, China and Japan were hit hardest. Due to global inflation, tuition fees and living costs in those countries are rising, aggravating the greater financial burden on Korean parents.
Importers are seriously worried. Kim (42) imports construction and storage machinery and says he suffered huge foreign exchange losses since the won weakened 5 percent against the dollar as he was importing equipment he contracted to buy back in June and handed it over to customers who had already paid for them in advance. Exporters usually benefit when the won weakens, but small and mid-sized exporters are now suffering because of a financial product called ¡°KIKO¡± (knock-in knock-out option) they signed up for at banks to buffer themselves against fluctuations in the exchange rate.
¡ß Carmakers and chipmakers benefit
Car and mobile phone makers are benefiting from the weakening of the won. A Hyundai Motor executive said he projected every W10 the dollar rises would translate into W200 billion in added revenues each year. Among Korean IT companies, mobile phone manufacturers also benefit. One staffer at a mobile phone maker said Samsung and LG Electronics profit since they procure between 60 and 70 percent of their components in Korea and export over 90 percent of their products overseas.
The automotive and electronics industries saw the benefits of a strengthening euro and yen against the dollar, which made European and Japanese rival products more expensive to buy overseas.
But it is by no means clear that these businesses will continue to reap the benefits of the weaker won. Seo Dong-pil, an analyst at Hana Daetoo Securities, points out that the weak won is due to the strong dollar and a global economic slowdown, so the situation cannot be seen as a bullish factor for Korean exporters. The reason is that consumption is dropping as the global economy enters an atmosphere of stagnation. Seo said rather than let inflationary pressures build with the won¡¯s continuing weakness, it would be better for the Korean economy for the currency to strengthen and stabilize.
(englishnews@chosun.com )
|
