In a report on Thursday, the Samsung Economic Research Institute said, "The optimum exchange rate would be approximately W1,002 to the dollar, given Korea's trading environment vis-a-vis seven major countries including China and commodity prices as of August.” The won has been falling “irrationally” since March and will likely rise if the dollar drought is alleviated, it said.

With a current account surplus expected in the fourth quarter this year, the won could rally steeply in the October-December period, the report predicted.

"The weakening of the won was due in large part to artificial demand caused by a dollar drought and people's expectation that it will keep falling. People tend to react sensitively to even minor signals given that Korea's foreign exchange market is smaller than the country’s economic size and the country's businesses use U.S. dollars in settling 97 percent of their trade bills."

The report sought to dispel fears of a major shock, saying since the maturity of 32 percent of the country's short-term foreign debts was extended even during the Asian crisis in December 1997, chances are slim that the country will be required by lenders to repay all its short-term debts at once.

"As of September, the country's foreign exchange reserves stood at $239.7 billion,” it said. “So it is unlikely that the country's foreign liquidity will be depleted soon, notwithstanding a current account deficit, capital drain or maturing foreign debt.”

Meanwhile, Lee Jin-woo, a senior analyst at NH Investment & Futures, couched the same prediction as a warning to speculators. "Now is the time for the investors to study not foreign exchange graphs but those of oil prices that have been falling sharply since July.” Already currency speculators surely suffered a huge loss as a result of the won rising on Thursday, he said. “The won weakened excessively in recent days for psychological reasons, and it will rise dramatically if liquidity returns to the market.”

(englishnews@chosun.com )