July 28, 2015 10:32
A strong Korean won and a weak Japanese yen were the main concerns among traders here in the first half of this year, but now the situation has been reversed.
The won, which hovered under W1,100 against the U.S. dollar until last month, is falling quickly to approach W1,170, slipping past the marker at one point in Monday's trade, but finished at W1,167, down W0.90 from the previous day.
The won traded at around W940 per 100 yen after hitting 885.
The weakening won is good news for exporters who compete with Japanese firms but also a sign of foreign investors leaving the Korean stock and bond markets.
Experts say the main reason is a projected U.S. interest rate hike, which has led to a strengthening of the dollar.
Federal Reserve Chair Janet Yellen has declared she would raise the benchmark rate this year and analysts expect the decision to be made as early as September. That would mean an end to seven years of zero-interest rates.
A weakening won, analysts say, has more benefits for an export-dependent country like Korea. Song Kyoung-hee at Woori Finance Research Institute said, "At a time when exports are the only means to boost the economy, a weakening won should help boost the price competitiveness of Korean exports and also ease low prices."
But the rapid fall means that there is little wiggle room left. Chang Bo-hyoung at Hana Institute of Finance said, "The won's weakening appears to be a temporary overheating. It will not be easy for the won to drop past W1,200."
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